The Federal Court has ordered Mercer Super to pay an $11.3 million penalty after it admitted it made misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.
The proceedings were first brought forth by the Australian Securities and Investments Commission (ASIC) in February 2023 and marked the first time the corporate regulator had taken an Australian entity to court regarding alleged greenwashing conduct.
In its latest judgment, the court observed Mercer made misleading statements on its website and in a video published online during four different periods from 12 November 2021 to 1 March 2023 about seven “Sustainable Plus” investment options.
These options were offered by the Mercer Super Trust, of which Mercer is the trustee.
Notably, the options were available to members through the “select-your-own” investment options, which allowed members to blend options to suit their needs, and according to ASIC, they were marketed “for potential members that are deeply committed to sustainability”, comprised a higher proportion of sustainability-themed assets and were subject to additional investment exclusions of companies in certain sectors.
The statements regarding these options suggested investments in companies involved in carbon intensive fossil fuels like thermal coal, as well as alcohol production and gambling, were excluded.
However, as per the judgment, the representations were determined to be false and misleading because six of those seven investment options actually included investments in such companies, and Mercer’s investment policies actually permitted such investments.
The court found members who took up the Sustainable Plus options had investments in:
– Fifteen companies involved in the extraction or sale of carbon intensive fossil fuels (including AGL Energy Ltd, BHP Group Ltd, Glencore PLC and Whitehaven Coal Ltd),
– Fifteen companies involved in the production of alcohol (including Budweiser Brewing Company APAC Ltd, Carlsberg AS, Heineken Holding NV and Treasury Wine Estates Ltd).
– Nineteen companies involved in gambling (including Aristocrat Leisure Limited, Caesar’s Entertainment Inc, Crown Resorts Limited and Tabcorp Holdings Limited).
When handing down the decision, Justice Horan noted “serious” contraventions admitted by Mercer.
“They arose from failures by Mercer to implement adequate systems to ensure that ESG claims in relation to its superannuation products were accurate, and to monitor and enforce the application of any sustainability exclusions associated with such ESG claims,” he said.
Justice Horan added it remains “vital that consumers in the financial services industry can have confidence in ESG claims made by providers of financial products and services”.
“As is the case in many other industries, consumers may place great importance on ESG considerations when making investment decisions,” he said.
“Any misrepresentations in relation to ESG policies or practices associated with financial products or services, whether as an aspect of ‘greenwashing’ practices or otherwise, undermines that confidence to the detriment of consumers and the industry generally.”
According to ASIC, the judgment serves as a strong example of the greenwashing action it will take in the event of any contraventions.
“We will continue to monitor the market for ESG-related claims that cannot be validated by evidence to ensure the market is fair and transparent,” said ASIC deputy chair Sarah Court.
In addition to the penalty, Mercer Super has also agreed to pay ASIC’s costs of and incidental to the legal proceedings, in the agreed sum of $200,000.
ASIC has two further cases before the Federal Court concerning greenwashing, with action against Vanguard Investments Australia and Active Super.
