Mercer Superannuation (Australia) Limited (Mercer) has been ordered to pay a landmark penalty of A$11.3 million after it admitted making misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.

The Australian Securities and Investments Commission (ASIC) and Mercer agreed the penalty as part of a settlement of the proceeding late last year, subject to Federal Court approval. Read the Federal Court’s judgment here. 

Mercer’s representations

ASIC alleged (and Mercer admitted) that during four different periods from 12 November 2021 to 1 March 2023 it made false and misleading representations about seven “Sustainable Plus” investment options offered by Mercer Super Trust, of which Mercer is trustee. These statements, which were absolute and unqualified, marketed the “Sustainable Plus” options as suitable for members who “are deeply committed to sustainability” because they excluded investments in companies involved in or deriving profit from the production or sale of alcohol, gambling, and carbon intensive fossil fuels. 

Mercer admitted that, contrary to its representations, the “Sustainable Plus” options did not exclude all investments in companies involved in alcohol production, gambling, or carbon intensive fossil fuels and that it did not have reasonable grounds to make the representations. The Federal Court concluded there was a real possibility that the representations would lead those to whom they were made into error. 

In finding that the agreed penalty was appropriate, the Federal Court took into account that a growing number of consumers consider “green” claims and credentials when making investment decisions, which means there is a strong incentive for suppliers of financial services to supply investment products that focus on ESG considerations. Justice Horan said: “it is vital that consumers in the financial services industry can have confidence in ESG claims made by providers of financial products and services”. He continued: “Any misrepresentation 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.” 

Other ASIC greenwashing cases

Mercer's penalty will be a relevant benchmark for the Court in setting future penalties following ASIC's successful judgments against:

• Vanguard in March this year when the Federal Court found Vanguard had made misleading claims about certain ESG exclusionary screens applied to investments in one of its index funds (judgment here); and
• the trustee of the Active Super superannuation fund in June this year when the Federal Court found the trustee made various misleading representations about its ESG credentials (judgment here).

Avoiding greenwashing claims about financial products

In New Zealand, the Financial Markets Authority issued helpful Guidance in December 2020 in respect of financial products that incorporate non-financial factors (such as 'socially responsible' managed funds and 'green' bonds). ASIC's Information Sheet on how to avoid greenwashing when offering or promoting sustainability-related products is also useful. More generally, see our previous article which looks at how businesses can mitigate greenwashing claims. 

Get in touch

If you have any questions about greenwashing or ESG claims more generally, please contact one of our experts. 

Special thanks to Achi Simhony for her assistance in preparing this article.