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Alcohol, gambling, and fossil fuels. How Australia fights against greenwashing.

A greenwashing lawsuit has just been filed by Australian Securities & Investment Commission (ASIC) with the Federal Court of Australia against Mercer[1]. ASIC is the equivalent of the Polish Financial Supervision Authority (KNF, Komisja Nadzoru Finansowego) and the US Securities and Exchange Commission (SEC). Mercer is a global consulting company with several lines of business. The claim concerns its trustee services.

ASIC traced information published by Mercer on its website and analyzed description of its investment options. It established that Mercer offered its "Sustainable Plus" products to those "who are deeply committed to sustainability"[2]. Among other things, this option was advertised as "excluding investments in certain sectors deemed not to be sustainable", i.e. investments in alcohol, gambling and carbon intensive fossil fuels like thermal coal. ASIC claims that Mercer represented that Sustainable Plus funds would not, in future, be invested in companies deriving profit from such investments[3].

ASIC claims that Mercer Sustainable Plus Australian Shares and Mercer Sustainable Plus Shares held investments in two companies involved in or deriving profit from the extraction or sale of carbon intensive fossil fuels and funds. Moreover, "Growth", "Conservative Growth", "Moderate Growth" and "High Growth" investment options collectively held investments in fifteen companies involved in or deriving profit from the same activity. Annexure to the Notice of Claim provides for a detailed calculation showing that Mercer’s total value of exposure of the Sustainable Plus funds in carbon intensive fossil fuels significantly increased. In January 2022 the value was over AUD 4.4M. By November 2022 it had already exceeded AUD 7M.

Pursuant to Article 12DB(1)(a) of the Australian Securities and Investments Commission Act 2001, it’s prohibited to make a false or misleading representation that services are of a particular standard, quality, value, or grade. That obligation is put on the person that trades or promotes such financial services. Consequently, ASIC filed a claim with the court on 27 February 2023. The plaintiff alleges that Mercer has made false or misleading representations and/or engaged in conduct liable to mislead the public in relation to its sustainable investment options.

ASIC requested the Australian Federal Court to, among other things, order Mercer to pay pecuniary penalties and to disclose the contraventions alleged in the proceedings. The plaintiff also seeks an injunction preventing Mercer from making further misrepresentations that present its products as sustainable, while they do not meet the provided characteristics.

It is worth noting that ASIC did not challenge Mercer's use of the word "sustainable" in its offerings but referred to the very precise assurances that Mercer made in its marketing materials. After a detailed analysis of Mercer’s portfolio, ASIC concluded that the products did not bear the characteristics as advertised.

According to ASIC’s press release, this is their first greenwashing court action. Until now, ASIC has issued over AUD 140,000 in infringement notices to companies, suspected of greenwashing. The infringement notices were issued against various companies, including Vanguard Investments Australia and Black Mountain Energy[3].

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