Greenwashing scrutiny ramps up for super funds

With a fourth superannuation fund pulled up on its sustainability claims last week, Super Review has rounded up all the greenwashing action by ASIC in the superannuation sector. 

Greenwashing has been an issue that has come front and centre for ASIC over the past 12 months. This year alone, it has reiterated on numerous occasions its commitment to addressing the issue in the financial services industry. 

Speaking at the Conference of Major Super Funds, ASIC commissioner, Danielle Press, said this was an important area of focus for the regulator, for “reliable disclosure practices are vital to a well-functioning market”.

“The findings of a recent ASIC survey showed that consumers take ESG credentials into account when making investment choices,” she said.

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“Consumers and investors should be able to make informed decisions about financial products with trust and confidence. This includes when they are looking at sustainability focused offerings in superannuation.

“While people have choice within that space, they don’t have a choice not to contribute … so that absolutely adds to the need to ensure that super funds are acting to a higher standard and to a [member’s] best [interests] standard.”

Similarly, deputy chair, Karen Chester, told audience members at the Responsible Investment Association of Australasia (RIAA) conference that ASIC is unlikely to slow its pace on greenwashing enforcement. 

With super funds being held to a higher sustainability standard than ever before, these are the funds that have come under ASIC scrutiny:

Diversa Trustees

In December 2022, the superannuation trustee received an infringement notice from ASIC regarding alleged greenwashing.

Diversa was the issuer of superannuation product Cruelty Free Super (CFS), as trustee for Professional Super, a sub-fund of the Tidswell Master Superannuation Plan.

ASIC was concerned regarding investment screens on the CFS website that may have been false as they claimed to prevent investment in companies involved in ‘polluting and carbon intensive activities’, ‘financing or support of activities which cause environmental and social harm’, and ‘poor corporate governance’.

ASIC stated Diversa paid $13,320 in compliance with the infringement notices on 22 December 2022. 

Mercer Super

In February 2023, ASIC announced it had commenced civil penalty proceedings in the Federal Court against Mercer Super for allegedly making misleading statements regarding the sustainable nature of its investment options.

ASIC alleged Mercer made statements on its website about seven ‘Sustainable Plus’ investment options offered by the Mercer Super Trust that marketed these options as suitable for members who were ‘deeply committed to sustainability’ as it would exclude investments in companies involved in carbon-intensive fossil fuels, gambling, and alcohol production.

The proceeding marked the first time ASIC has commenced court action after legislative amendments, arising from the Hayne royal commission, enhanced ASIC’s powers to take action regarding a broader range of superannuation trustee conduct.

The next further case management hearing is scheduled for 18 August 2023.

Future Super

The super fund came under ASIC’s greenwashing spotlight in May after it self-reported a Facebook post that ASIC believed may have been false or misleading by overstating the positive environmental impact of the Fund. The post stated: ‘Naysayers don’t join together to move nearly $400 million out of fossil fuels.’ 

At the time of the Facebook post, Future Super had approximately $400 million in total funds under management and had no basis to represent that the entirety of those funds had been invested in fossil fuels prior to being invested in the fund. 

The Facebook post was published on 29 May 2019 and remained on the Fund’s Facebook page until October 2022. 

Future Super paid the infringement notices on 27 April 2023. Payment of an infringement notice was not an admission of guilt or liability.  

Active Super

In August, ASIC commenced civil penalty proceedings in the Federal Court against the $13.5 billion Active Super fund for alleged greenwashing.

ASIC alleged Active Super made misleading conduct and misrepresentations to the market relating to claims it was an ethical and responsible superannuation fund.

Active Super represented on its website that it eliminated investments that posed too great a risk to the environment and the community, including tobacco manufacturing, oil tar sands, and gambling. The fund also stated it had added Russia to its list of excluded countries, following the invasion of Ukraine.

Instead, ASIC alleged, Active Super directly or indirectly exposed its members to 28 holdings that it had claimed to restrict or eliminate between 1 February 2021 and 30 June 2023.

These included gambling, tobacco, oil tar sands, and coal mining stocks such as The Star Entertainment Group and Whitehaven Coal as well as Russian entities Gazprom PJSC and Rosneft Oil Company.

Its Russian holdings remained in place in the portfolio as of 30 June 2023 despite the fund stating in May 2022 that it would stop investments in Russian companies in light of the war in Ukraine, one of several funds to do so.

The regulator is seeking declarations, pecuniary penalties, adverse publicity orders, and an injunction against Active Super from the Court.

The date for the first case management hearing is yet to be scheduled.