Lawyers share their ASIC greenwashing experience

The Australian and Securities Investments Commission (ASIC) is looking to make examples of firms when it comes to greenwashing, according to two lawyers who have dealt with the regulator on the matter.

ASIC had stated greenwashing is one of its priorities for enforcement action in 2023 and it had already taken action against Mercer Super, Vanguard, and Future Super. 

Harry New and Jacob Uljans, partners at Hall & Wilcox law firm, said they expect to see significant ongoing activity in this space over the next 12 months.

New, who specialises in financial services and insurance law, said the regulator’s focus was making clients nervous about their environmental, social, and governance (ESG) activity. The regulator is leaving no stone unturned and looking into firms’ marketing material, advice, product disclosure statements, social media posts, and formal documentation.

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New said: “Clients are nervous. ESG is a huge topic and they know it and they know that ASIC is very, very focused on it. ASIC is looking to make examples and that is clear from all of our interactions with ASIC.”

Uljans added the firm’s interactions with the regulator had seen ASIC take a “forthright position” when it came to ensuring firms made changes.

“One thing we are seeing in the context of engaging with ASIC is ASIC is taking quite a forthright position in relation to its requests that amended, even when the disclosures themselves are not misleading,” Uljans said.

“Businesses are increasingly aware of the risks associated with greenwashing and one of the things that we are seeing is an increasing trend towards what’s become known as ‘green hushing’ which is where businesses, rather than overstating their environmental or social credentials, actually understate or not disclose at all.

“And while that may — in the long-term — result in less overstatement or misrepresentation around ESG matters, it can also have a negative impact insofar as businesses are just not talking about the steps that they are taking to comply with climate expectations and otherwise ensure that their environmental and social activities are being recognised.”

New recommended clients ensure every public-facing disclosure is properly vetted and due diligence is undertaken to ensure it is accurate. Otherwise, they could face reputational damage and a financial hit if they were found to have greenwashed their products.

“There can be quite dire consequences, particularly from a reputational perspective, but also necessarily from a monetary perspective,” New concluded.

In May, Future Super received an infringement notice from ASIC over a Facebook post that ASIC felt may have been false or misleading thanks to overstating the environmental impact of the fund. The post stated: ‘Naysayers don’t join together to move nearly $400 million out of fossil fuels.’ 

This was the second super fund to come on ASIC’s radar after it launched civil penalty proceedings against Mercer Super in February 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 are ‘deeply committed to sustainability’ as it would exclude investments in companies involved in carbon-intensive fossil fuels, gambling, and alcohol production.

Last year, Vanguard received three infringement notices from ASIC in November for alleged greenwashing in its International Shares Select Exclusion Index Fund series. 

The Vanguard funds were structured to exclude certain investments in tobacco, however, while this screen applied to exclude manufacturers of cigarettes and other tobacco products, it does not exclude companies involved in the sale of tobacco products.