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Investment manager hit with infringement notice over greenwashing

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ASIC has taken action against an investment manager relating to concerns about alleged false and misleading statements.

On Tuesday, the Australian Securities and Investments Commission (ASIC) announced that it has taken action for greenwashing against Northern Trust Asset Management Australia.

Northern Trust has paid $29,820 to comply with two infringement notices issued by the regulator relating to concerns about alleged false and misleading statements regarding the application of a carbon emissions exclusion screen.

Northern Trust is the investment manager of the NT World Green Transition Index Fund.

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ASIC noted that the product disclosure statements (PDSs) of the fund claimed to exclude companies which derive 5 per cent or more of their total annual revenues (either reported or estimated) from thermal coal-based power generation and have a score of 3 or 4 in the low carbon transition management score quartile.

The regulator indicated that it was concerned that the information in the PDSs was misleading because the carbon emissions exclusion screen was not properly applied.

“ASIC was concerned that investors may have been misled by statements that certain energy companies would be excluded, when they were not. In this case, the exclusions and screenings were outsourced to a third-party company without significant oversight by Northern Trust,” commented ASIC Deputy Chair Sarah Court.

“We want to stress that as the publisher of these statements, it is the company itself who is responsible for them, not the third party applying the exclusions. Effective oversight of third parties is essential to avoid misleading investors.”

According to ASIC, at least three companies were not excluded by MSCI despite the fact they failed the low carbon transition management score quartile. As a result, there was an error in applying the carbon emissions exclusion screen.

The affected holdings included DTE Energy, NiSource and Power Assets Holding. The issue occurred from around 1 December 2022 to 28 July 2023. Northern Trust subsequently disposed of these holdings.

Northern Trust paid the infringement notices on 19 December, with ASIC noting that payment of an infringement notice is not an admission of liability.

In a statement provided to InvestorDaily, Northern Trust indicated that it has implemented enhanced internal controls and oversight since the error occurred.

“Three holdings were erroneously included within the MSCI Index and therefore within the fund and once identified, the three securities were divested from the fund and the index was updated accordingly,” the firm said.

“The three holdings represent less than AU$75,000/US$50,000 in the fund, which holds over 1,250 securities with assets under management (AUM) of AU$63 million/US$44 million. At no point was any one holding in the three companies greater than five one-hundredths of 1 percent (0.05 per cent) of the fund’s net asset value.

“To mitigate the risk of similar errors occurring in the future, Northern Trust Asset Management has implemented enhanced internal controls and oversight of the index and its constituents.”

ASIC has previously issued infringement notices in response to concerns about alleged greenwashing against Tlou Energy, Vanguard Investments Australia, Diversa Trustees, Future Super Investment Services and Black Mountain Energy.

The regulator also currently has three greenwashing/ESG civil penalty cases before the Federal Court against Mercer Super, Vanguard Investments Australia, and Active Super.

Investment manager hit with infringement notice over greenwashing

ASIC has taken action against an investment manager relating to concerns about alleged false and misleading statements.

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Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.

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