ESG claims in focus: ASIC chalks up another greenwashing win

Following hotly contested proceedings, on 18 March 2025 the Federal Court imposed a $10.5 million penalty against superannuation trustee LGSS Pty Ltd (LGSS), as trustee of Active Super (Active Super), for greenwashing conduct in contravention of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).

This represents ASIC’s third penalty win on greenwashing in 12 months,  following a number of  enforcement actions including the recent landmark penalty judgments of $11.3 million and $12.9 million against Mercer Superannuation (Australia) Ltd (Mercer) and Vanguard Investments Australia Ltd (Vanguard).

What this means for you

Against the backdrop of an increasingly active enforcement landscape, several takeaways emerge for Australian companies from this decision:  

• (Another) red light for greenwashing - regulator spotlight is here to stay: Active Super’s penalty is a salient reminder that Australian regulators maintain greenwashing as an enforcement priority. Both ASIC and the ACCC have once again included greenwashing on their 2025 enforcement hit lists. As highlighted by ASIC Deputy Chair, Sarah Court, following the Court’s decision:
  
  ‘This case demonstrates ASIC’s commitment to taking on misleading marketing and greenwashing claims made by companies promoting financial services. It is our third greenwashing court outcome, and we will continue to keep greenwashing in our sights.’
  
  In parallel, ASIC has called out the now commenced mandatory climate-related financial disclosure laws. It has indicated that although it may take a ‘pragmatic and proportionate’ approach to enforcing the new regime during the transition period, companies shouldn’t drop the ball on complying with existing legal obligations – including the longstanding prohibition against misleading and deceptive conduct.  
• Tying ASIC’s wins together: The Mercer, Vanguard and Active Super court outcomes confirm that:
  1. When an entity uses unqualified language or unequivocal terms such as we will ‘not invest’ or we will ‘eliminate’ in relation to investments, it cannot correct those representations by relying on a consumer searching around for other investment policy documentation that might otherwise qualify those statements.
  2. When superannuation trustees or managed investment schemes make representations as to investment screens or their green credentials, there is no distinction to be made between direct and indirect investments.
• Penalties may be costly for fund members – but it’s all part of the penalty ‘sting’: While ASIC sought a penalty of $13.5 million, Active Super argued that a penalty of no more than $2.456 million was justified because any greater penalty would reduce the pool of superannuation funds available for investment (and therefore reduce returns to fund members). This was rejected by the Court, which held that ‘[t]o fix a penalty by reference to a sum that seeks to guarantee fund members suffer no indirect loss by a reduction of returns would neutralise the sting of any penalty. That would be contrary to authority’.
• Caution against using previous ESG cases as a penalty yardstick: The $10.5 million penalty is slightly lower than — but still in the range of — penalties imposed in recent greenwashing cases ($11.3 million against Mercer and $12.9 million against Vanguard). However, the Court made it clear that while those cases bear similarities to the facts in these proceedings, little ‘analogical value’ could be drawn from them. We therefore caution other financial service providers from relying too heavily on any of these penalty amounts to provide a yardstick for estimating future penalties.
• Separate media correspond to separate courses of conduct: The relevant representations by Active Super were made across a variety of media, including on its website, sustainable and responsible investment policy, responsible investment report, and product disclosure statement (PDS) fact sheets. The Court imposed separate penalties in respect of the representations made in each medium and identified separate course of conduct corresponding to each medium.
• Greenwashing is serious – but it’s nothing special: The Court rejected an argument by ASIC that penalties for greenwashing should be set towards the higher end of the scale, noting that while greenwashing conduct is serious, it is no more serious than other misconduct because it is called ‘greenwashing’.  

The road ahead – driving your ESG accountability

It’s currently unclear if Active Super will appeal the Federal Court’s decision to the Full Federal Court – so watch this space.

In the interim, ASIC has previously flagged its enforcement efforts will move beyond misleading and deceptive conduct to licence obligations, directors duties, and a range of other ESG-related obligation areas. Accordingly, companies should:

• Review, review: Regularly reviewing ESG-related policies and practices for alignment on actual investment decisions and public disclosures is vital. This means reviewing all publicly facing disclosures, including annual reports, PDSs, website statements, media releases and other direct and indirect member communications.
• Verify: Make sure claims about ESG-related investments are verifiable and accurately reflect the implementation of screening exclusions or restrictions.
• Be informed: Stay up to date with ASIC and the ACCC’s guidance and enforcement action on greenwashing and ensure it is factored into your company. Also keep a close watch on what is happening with mandatory climate reporting and nature reporting and plan your approach early given the rapid pace of change in this area.

For more on how your company can drive ESG accountability – see our Next publication here.

Going back a step - how did we get here?

ASIC takes action

In August 2023, ASIC commenced proceedings against Active Super, alleging contraventions of sections 12DB(1)(a) and 12DF(1) of the ASIC Act. ASIC alleged that Active Super made false or misleading representations to members and potential members of the superannuation fund (of which Active Super is the trustee) about the ‘green’ or ‘ESG’ credentials of the fund’s investments. 

Active Super found liable for greenwashing

In June 2024, after a contested liability hearing, the Federal Court found that Active Super contravened sections 12DB(1)(a) and 12DF(1) by making false or misleading representations in relation to:

• Gambling, by making statements that it would not invest in companies deriving more than 10% of their revenue from gambling. Contrary to these statements, Active Super held investments in several gambling companies both directly and indirectly through pooled funds.
• Russia, by making statements that it would not invest in Russia (except for the representation in the Sustainable and Responsible Investment Policy, which acknowledged potential indirect investments through pooled funds).
• Oil tar sands, by making statements that it would eliminate investments in companies deriving revenue from oil tar sands, even though Active Super held investments in such companies both directly and indirectly.
• Coal mining, by making statements that it would not invest in companies deriving more than 33.3% of their revenue from coal mining, even though Active Super held investments in such companies both directly and indirectly.

The Court found that Active Super’s representations about avoiding investments in tobacco companies were not misleading, and that an ordinary and reasonable consumer would not consider companies supplying packaging to tobacco manufacturers as ‘tobacco companies’.

The statements for which Active Super was found liable were made on or in a range of different mediums (see ‘Splitting the ‘sting’’ below).

A costly reminder – what happened on penalty?

Penalty hearing

Active Super disputed the appropriate penalty to be imposed. At the penalty hearing, ASIC sought a $13.5 million penalty, while Active Super sought a $2.456 million penalty. Importantly, trustees of superannuation funds cannot be indemnified from the assets of the fund for a criminal, civil or administrative penalty.

Active Super’s primary submission in support of a smaller penalty was that a penalty exceeding $2.456 million would negatively impact Active Super’s members. Active Super’s acting CEO and company secretary gave evidence that while Active Super had insurance coverage for a penalty up to $20 million, its insurance policy would not cover the 30% tax liability on insurance proceeds (which would be treated as a capital gain). As such, Active Super’s members would need to pay from their retirement savings at least 30 cents on the dollar for any penalty exceeding $2.456 million. Active Super submitted that whilst the trustee cannot be indemnified from the assets of the fund for a penalty, it can draw from the assets to meet a tax liability. While ASIC objected to some evidence in support of this situation, it was admitted by the Court on the basis that it was relevant to the issue of general deterrence as it explained the impact on members.

Splitting the ‘sting’  

The Court imposed an aggregate penalty of $10.5 million on Active Super. This consisted of separate penalties relating to the representations conveyed through each of the relevant mediums, e.g.: