Australian regulator steps up greenwashing crackdown

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Australia’s corporate watchdog has pledged to continue to crack down on misleading environmental claims made by funds this year after it launched legal action against three in 2023. 

Sarah Court, deputy chair of the Australian Securities and Investments Commission, told the Financial Times that the regulator would take action against purportedly ethical funds that were marketing investments as “net zero” or “carbon neutral” but failed to live up to those claims. 

“It is misleading and deceptive conduct,” Court said. “We are trying to send messages to the market that we won’t tolerate this.” 

Last year, ASIC took three funds — Mercer Superannuation, Vanguard Investments Australia and Active Super — to court over greenwashing claims. 

The case against Mercer was heard in December and a A$11.3mn ($6mn) penalty has been agreed but must be ratified by the court. Mercer’s Sustainable Plus fund was marketed as excluding fossil fuel companies, but nonetheless invested in carbon-intensive stocks including Glencore and BHP according to the regulator, as well as gambling and alcohol stocks, which were supposed to be excluded.

Mercer declined to comment because the case is still in front of the court. Vanguard declined to comment while Active Super said it welcomed increased scrutiny of disclosure standards but could not comment on the legal case with ASIC.

ASIC alleges that the many funds and companies have failed to live up to their own ethical claims to exclude investments in fossil fuels, tobacco and gambling companies and in some cases Russian investments. The regulator also has the power to fine companies directly, and has issued a number of penalties over misleading claims, including in Facebook posts. 

Court said it was imperative that companies complied with laws surrounding the marketing of ethical funds and a failure to do so created issues with market integrity and competition. “You don’t have to make these claims. You are doing it to be attractive to investors. If you do, you have to make sure you are living up to those claims,” Court said. 

She argued that enforcement measures mattered as investors looking for ethical investments had to rely on the product’s claims and often did not have the capacity to test the veracity of those messages. 

ASIC published a set of guidelines over greenwashing claims in June and has intensified its monitoring of claims made by funds and companies since. Some funds are self-reporting breaches while others have been highlighted by funds frustrated by erroneous statements from rivals.  

ASIC’s step-up in enforcement comes as global action against alleged greenwashing has started to build, with competition and advertising regulators acting against the ethical and environmental claims of companies such as Unilever and Shell.

Financial regulators, including the Financial Conduct Authority in the UK and the Securities & Exchange Commission in the US, have also targeted alleged misstatements by funds. German asset manager DWS, owned by Deutsche Bank, agreed to pay $19mn to settle greenwashing changes levelled against it by the SEC in September. 

Court said that ASIC has been “out in front” on greenwashing after making the issue an enforcement priority in 2023. That has been backed by the Australian government which set aside A$4.3mn in the 2023 budget to fund the regulator’s crackdown on greenwashing. The country is also set to introduce mandatory climate reporting for companies from 2024. 

“It’s fair to say that there’s a growing interest in countries like Australia,” she said of the global attention to the country’s efforts to enforce environmental and ethical claims made by funds.