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June, 2024

Federal Court finds Active Super made misleading ESG claims

The Federal Court has found Active Super contravened the law by making misleading claims about its environmental, social and governance (ESG) credentials.

The greenwashing proceedings, brought against the trustee of the superannuation fund, LGSS, related to claims made in Active Super’s marketingthat it had eliminated investments posing high environmental and community risks, including gambling, coal mining, and oil tar sands. The fund also represented that Russian investments were ‘out’ following the invasion of Ukraine.

However, the Federal Court found that from 1 February 2021 to 30 June 2023, Active Super invested in securities it claimed were eliminated or restricted by ESG investment screens. These securities were held by Active Super both directly and indirectly (via managed funds or ETFs).

Justice O’Callaghan rejected Active Super’s claims that an ordinary consumer would distinguish between holding shares in a company and indirect exposures through a pooled fund.

In his ruling, Justice O’Callaghan said: “I am unable to accept LGSS’s contention that an ordinary and reasonable member of the relevant class would draw a distinction between holding shares in a company and indirect exposures through pooled funds. It seems to me that such a consumer would not draw that distinction, including in particular because there is nothing in the Impact Reports or on the LGSS website that suggests that the claims that there was, for example, “No way” Active Super would invest members funds in gambling, tobacco and so on, was to be read subject to a proviso that there was a way in which it would do exactly that, by investing indirectly, not directly. In my view, that distinction is one which no ordinary reasonable consumer would draw.”

“If such a consumer was told, as they were told, that there was “No way” that LGSS would invest in tobacco or gambling, he or she would not search around for some investment policy that might qualify such statements. Absent some indicator on the face it, such as a footnote or asterisk with some accompanying statement that the apparently unqualified language was, in fact, something that was subject to qualifications or limitations, they would have no reason to,” said O’Callaghan.

At the time of publishing the representations, Active Super held direct and indirect investments in companies such as SkyCity Entertainment Group Ltd, PointsBet Holdings Ltd, Gazprom PJSC, Sberbank of Russia, ConocoPhillips, Shell Plc, Whitehaven Coal Limited, and Coronado Global Resources.

The Court found that Active Super did not engage in misleading representations about its holdings in companies involved in the production of packaging used for tobacco products. Specific representations in Active Super’s Sustainable and Responsible Investment Policy were not misleading with respect to Russian or oil tar sands investments.

“This is a significant outcome which shows our commitment to taking on misleading marketing and greenwashing claims made by companies in the financial services industry. ASIC took this case because it sends a strong message to companies making sustainable investment claims that they need to reflect their true position,” said ASIC Deputy Chair Sarah Court.

The matter has been listed for a further hearing at which the Court will consider the appropriate form of declaratory relief. The Court will consider the pecuniary penalty to impose for the conduct at a later date.