Australia Court Fines Mercer $7.4 Million for Misleading Sustainable Investment Claims

The Federal Court in Australia issued a judgement Friday, ordering Marsh McLennan company Mercer Superannuation to pay an A$11.3 million ($USD7.4 million) penalty for making false claims about some of its sustainable investment options. Mercer has admitted to the allegations in the case.

The judgement follows the launch of the court action early last year by Australia’s corporate, markets, and financial services regulator, the Australian Securities & Investments Commission (ASIC), alleging that from 2021 through 2023 Mercer made claims on its website that seven ‘Sustainable Plus’ investment options excluded companies involved in carbon intensive fossil fuels like thermal coal, as well as companies involved in alcohol production and gambling, yet the funds were found to be holding several companies involved in those activities.

The “Mercer Sustainable Plus High Growth” option, for example, was found to hold investments in 15 companies involved in, or deriving profit from, the extraction or sale of carbon intensive fossil fuels, 15 companies involved in the production or sale of alcohol, and 19 companies involved in gambling, the judgement noted.

In the ruling by Justice Horan, the court said:

“As the parties accept, greenwashing practices have the potential to reduce consumer confidence in environmentalEnvironmental criteria consider how a company performs as a steward of nature., socialSocial criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. and corporate governanceGovernance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. (ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments.) claims, which undermines the efforts of businesses that are pursuing ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. goals accurately and fairly. In addition to harming consumers by depriving them of information relevant to making choices in accordance with environmentalEnvironmental criteria consider how a company performs as a steward of nature., socialSocial criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. and ethical values or objectives, false or misleading ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. claims may confer unfair competitive advantages on companies in marketing their financial products and services.”

The ASIC suit formed part of a series of a series of greenwashing-focused actions by the regulator, including cases against superannuation fund Active Super and Vanguard Investments. The suit against Mercer was the first to be pursued by ASIC, while the court ruled in June in that Active Super made misleading ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. investing representations, and the Vanguard case is ongoing.

The cases followed a warning by ASIC Chair Joseph Longo to providers of investment funds and financial products that the regulator was watching out for misleading sustainability claims, and that it was providing guidance for fund managers and issuers to keep clear of greenwashing.

Following the judgement, ASIC Deputy Chair Sarah Court said:

“This was ASIC’s first greenwashing case brought before the Federal Court; a landmark case both for ASIC and for the financial services industry. It demonstrates the importance of making accurate ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. claims to investors and potential investors.”

Court added:

“We will continue to monitor the market for ESG-related claims that cannot be validated by evidence to ensure the market is fair and transparent.”