On 5 June 2024, the Federal Court found that LGSS Pty Ltd, as the trustee of the superannuation fund now known as Active Super (Active Super) made false or misleading representations and engaged in conduct that was liable to mislead the public about its ESG credentials in breach of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).

Specifically, ASIC alleged that, from 1 February 2021 to 30 June 2023, Active Super made false or misleading representations by claiming in its marketing materials that it would not invest in companies associated with gambling, tobacco, oil tar sands, coal mining or in Russian companies. During this time, Active Super managed approximately $13.5 billion in superannuation assets for around 89,000 members.

It remains to be seen what the Court will order in terms of pecuniary penalties and adverse publicity orders, which will be the subject of a further hearing. We will provide an update on the Court’s orders once they become available. 

Key takeaways

  • This is the second time ASIC has been successful in the Federal Court in relation to greenwashing. Its first greenwashing win in the Federal Court was against Vanguard on 28 March 2024 (see our briefing ASIC’s first greenwashing win in Federal Court), and we are still waiting for the final outcome in the case ASIC is pursuing against Mercer Super. ASIC continues to be one of the leading financial regulators globally taking enforcement action to combat greenwashing. 
  • Notably some of the claims by Active Super were put in absolute terms; for example, a report stated that gambling investments fell into a ‘no way’ category of investment and that Active Super’s negative screens would ‘eliminate’ its ‘exposure to high ESG risk industries’. The judge found that if a consumer was told that there was “No way” that Active Super would invest in a certain sector, absent a footnote or asterisk, they would not look for a qualification to this (otherwise unqualified) statement. INFO 271, ASIC’s information sheet on how to avoid greenwashing makes (very!) clear that headline claims should not be misleading and that the more a qualification is required to balance the information contained in the headline claim, the more prominently placed the qualification should be. INFO 271 continues to be a very useful framework for entities to test ‘green’ claims.
  • The civil penalty proceedings ASIC has brought to date (against each of Vanguard, Mercer Super and Active Super) relate to the purported application of exclusionary criteria for investment products. This highlights the importance of ensuring that: (i) all ESG-related claims can be substantiated; (ii) the systems in place to implement advertised exclusionary screens in relation to investment products are appropriate (and that they are appropriately applied); and (iii) registered entities maintain (and demonstrate) transparency in investment decisions, particularly in indirect investments through pooled funds or overlay strategies.
  • Although there is an increasing amount of emerging legislation in this space (see in particular the UK Financial Conduct Authority’s anti-greenwashing rule which came into effect on 31 May 2024), ASIC Chair Joe Longo has highlighted that ASIC’s greenwashing interventions are founded on enforcing well-established legal obligations that prohibit misleading and deceptive conduct, and ASIC’s focus is on “entities that we consider carelessly give inaccurate or misleading statements” and that “the fundamental underlying principles of accuracy and transparency are not new”. 
  • In addition to the issue of whether representations are misleading, ASIC has also made clear that it is focused on governance around sustainable representations made to investors (i.e. looking to ensure that responsible entities deliver on the representations they make about their funds’ sustainable investment strategies and objectives). 
  • It therefore remains crucial that organisations continue to review and assess the appropriateness of the strategies they have in place to ensure the public statements they make are accurate and substantiated to avoid or reduce the risk of greenwashing. This will include having in place a robust framework of policies and procedures to ensure investment strategies and objectives align with publicly stated policies and statements (including on social media). See our articles ASIC launches greenwashing court action against superannuation firm and Summary of ASIC Guidance on ‘How to avoid greenwashing when offering or promoting sustainability-related products’  for previous updates where we outlined key issues which companies should consider when putting in place strategies to avoid or reduce the risk of greenwashing.
  • This forms part of a concerted effort by regulators to combat greenwashing. In April 2024, the ACCC kicked-off its greenwashing enforcement in the courts by commencing proceedings in the Federal Court against Clorox Australia Pty Ltd, for allegedly making false or misleading representations that certain kitchen and garbage bags were partly made of recycled ‘ocean plastic’, in breach of the Australian Consumer Law. See our briefing on this case here, Not so glad to be green: ACCC commences first Federal Court case on greenwashing. On the basis that ACCC Chair Gina Cass-Gottlieb has made clear that the ACCC has in train “a number of in-depth greenwashing investigations”, we expect to see the regulator take further court enforcement action against greenwashing. 

The case ASIC brought and Active Super’s case

ASIC alleged that between 1 February 2021 and 30 June 2023 (over two years), Active Super misrepresented to potential investors that it would not make or hold investments in:

  • Companies that derive more than 10% of their revenue from gambling (Gambling Representations);
  • companies that derive any revenue from tobacco (Tobacco Representations);
  • companies that derive any revenue from oil tar sands projects (Oil Tar Sands Representations);
  • companies that derive one-third or more of their revenue from coal mining (Coal Mining Representations).

Following Russia’s invasion of Ukraine, from May 2022, Active Super represented that it would divest its Russian investments and make or hold no further investments in Russia (Russia Representations).

  • These statements (listed in Annexure A of ASIC’s concise statement (Annexure A)) were made on Active Super’s website, on social media, in its Sustainable and Responsibility Investment Policy (SRI Policy), Active Super’s annual impact report (which purported to explain why ‘Active Super investments are making a difference’) (Impact Report) and product disclosure statements, as well as public statements made by Active Super’s CEO.

ASIC alleged that these representations were false or misleading because Active Super had in fact invested in securities that it had claimed were eliminated or restricted by ESG investment screens. These securities were held by Active Super both directly and indirectly (via managed funds or ETFs).

Active Super did not admit any of these allegations, and submitted that:

  • None of the representations ASIC relied on were conveyed (and were subject to certain qualifications and/or nuances);
  • the representations, if made, were not made ‘in trade or commerce’ within the meaning of s 12DB or s 12DF of the ASIC Act on the basis that Active Super is a ‘not-for-profit-member’ fund and that it was formed for the sole purpose of acting as a trustee of a regulated superannuation fund and ‘has no commercial purpose’;
  • it did not engage in conduct contrary to the representations if made; and
  • in any event, the representations, if made, were as to future matters and Active Super had a reasonable basis for making them.

The Court’s findings

Justice O’Callaghan found that ASIC was entitled to declarations of contravention of the ASIC Act in relation to the representations made as follows:

  • In respect of the Gambling Representations, in summary, O’Callaghan J concluded that:
    • they were not ‘guiding principles’ (as contended by Active Super) because the critical language used in them (such as ‘not invest’, ‘No Way’ and ‘eliminate’) was absolute and unequivocal. For example, a visual representation headed ‘Are we in? Or out?’ indicating that certain investments were 'High ESG Risk' and 'No Way' to whether Active Super decides to invest in those companies, refers to a category that admits no exceptions;
    • an assertion in the Impact Report that ‘[a]ny investments on our restricted list are considered on a case-by-case basis’ could not imply that investments may be held in restricted companies;
    • the ordinary reasonable consumer is unlikely to have read the Gambling Representations as being the subject of potential qualifications in the SRI Policy (there were, for example, no footnotes or asterisks to make clear that the Gambling Representations were subject to specific limitations contained in terms and conditions);
    • even if the Gambling Representations were to be read in light of the SRI Policy, the policy does not say (or even suggest) that if a company was found to derive more than 10% of their revenue from gambling, Active Super ’would consider whether to divest the holding’ and ‘may not do so’;
    • the ordinary reasonable consumer would not read the terms of the SRI Policy as a whole to imply that Active Super was promising ‘to use its best endeavours not to invest in gambling’ and to suggest otherwise is ‘farfetched and no ordinary reasonable consumer would ever have imagined any such a thing’; and  
    • an ordinary reasonable consumer who was a member or prospective member of the fund would reasonably understand gambling to include lottery tickets (which Active Super disputed).
  • In respect of the Oil Tar Sands Representations (except for the specific representation at item 13, Annexure A, as described below), O’Callaghan J did not accept that the relevant representations (which included statements that Active Super would ‘eliminate investments in oil tar sands’ and that its list of investment restrictions included ‘companies which derive revenue from oil tar sands’) were qualified, or could be construed to mean that if a company was found to derive more than 33.3% of their revenue from oil tar sands projects, it ‘would consider whether to divest the holding’. As such, these representations were misleading and deceptive given that Active Super held four direct investments in companies that derived revenue from oil tar sands.
  • In respect of the Coal Mining Representations, even if an ordinary reasonable consumer would have read the representation contained in the SRI Policy as being subject to the acknowledgement in that policy that Active Super may still have indirect exposure to companies which derive more than 33.3% of their revenue from coal mining through pooled investment funds, the fact remains that Active Super held a direct investment in such a company during the relevant period.
  • In respect of the Russia Representations (except for the specific representation at item 12, Annexure A described below), O’Callaghan J did not accept Active Super’s submission that the Russia Representations were commitments as to future investments decisions, but assertions that the fund no longer had any exposure to Russian stocks (and therefore false and misleading).
  • No ordinary and reasonable member of the relevant class would draw a distinction between holding shares in a company and indirect exposures through pooled funds, as contended by Active Super (and in any case there was nothing in the Impact Report or on Active Super’s website to suggest that there was a distinction in how these would be treated). 

The Court held that the following representations were not made out and/or not misleading and deceptive:

  • In respect of the Tobacco Representations, O’Callaghan J reasoned that the ordinary reasonable consumer would not regard an investment in a company that derived between 1.5% and 11% of its revenue from supplying packaging to tobacco companies as being a ‘tobacco company’ or a company engaged in the manufacture or production of tobacco.
  • One of the Russia Representations contained within the SRI Policy on the basis that an ordinary reasonable consumer would read the statement that the ‘Trustee has determined that the Fund will not make investments in Russia’ (item 12 in Annexure A) as being subject to the immediately surrounding context of the policy in which it appears and that, when read in context, that statement conveyed that Active Super may have indirect exposure to Russian investments through pooled funds.
  • One of the Oil Tar Sands Representations in the SRI Policy (item 13 in Annexure A) conveyed that Active Super merely restricted investments in companies that derived 33.3% of more of their revenue from oil tar sands (as opposed to not making or divesting them altogether).

The Court concluded that the alleged conduct was ‘obviously’ in trade or commerce because the function of the trustee company was to operate and manage the superannuation fund with a view to making profits for members and that the statements relied on in Annexure A were, and were intended, to promote Active Super’s supply of services to actual or potential members.

Section 12BB(1) of the ASIC Act provides that if a person makes a representation for any future matter and the person does not have reasonable grounds for making it, the representation is taken to be misleading. O’Callaghan J agreed with counsel for ASIC that Active Super did not adduce evidence as to the grounds that were relied on for the making of the various statements and that the relevant representations identified above would still be relevantly misleading, even if they were characterised as having been made with respect to future matters.


Justice O’Callaghan expressed frustration at having to read the Concise Statement in one hand, and Annexures A (the representations made) and B (investments contrary to the representation) in the other to make sense of ASIC’s allegations, stating that this proceeding was ‘yet another example of a case where the efficient conduct and disposition of the application would have been better served by it being pleaded in the conventional fashion at an early stage’.


Setting a precedent and sending a wider compliance message to the market 

Australian enforcement activity

ASIC continues to make clear that greenwashing is top of its regulatory agenda; Deputy Chair Sarah Court stated in a press release made just after the decision was released that ‘ASIC took this case because it sends a strong message to companies making sustainable investment claims that they need to reflect their true position’.

That is two greenwashing wins now for ASIC. See, ASIC’s first greenwashing win in Federal Court for an overview of ASIC’s case against Vanguard (decided on 28 March 2024). We are still waiting for the final outcome concerning the first civil penalty action taken by ASIC against Mercer Super in February 2023 (although an ASIC senior executive confirmed at a public hearing on 22 April 2024 of the Senate Greenwashing Inquiry that a proposed $11.3 million penalty settlement has been agreed to, although it remains subject to final court approval). In the two years since ASIC introduced INFO 271 (in June 2022) outlining the framework ASIC would apply when testing ‘green’ claims and indicating the issues to be considered when offering or promoting sustainability-related products, ASIC has issued 17 infringement notices to 7 entities, totalling more than $230,000.

ASIC has summarised the main types of conduct that have required it to intervene as falling under the following categories:

  • net zero statements and targets, that were either made without a reasonable basis or that were factually incorrect;
  • use of terms such as ‘carbon neutral’, ‘clean’ or ‘green’, that weren’t founded on reasonable grounds;
  • overstatement or inconsistent application of sustainability-related investment screens; and
  • use of inaccurate labelling or vague terms in sustainability-related funds.

As indicated above, the ACCC has also identified greenwashing as an area of concern in its 2024-25 compliance and enforcement priorities. Prior to commencing its first court enforcement action proceedings in the Federal Court against Clorox Australia Pty Ltd on 18 April 2024, the ACCC accepted a court-enforceable undertaking (on 28 November 2023) from yoghurt manufacturer, MOO, in respect of false and misleading claims that its product packaging was made from ‘100% ocean plastic’. Broadly speaking, both MOO and Clorox described their products as being made of ‘ocean plastic’ when they were made using plastic that had been collected within 50 kilometres of the shoreline. For more information on the guidance published by the ACCC in December last year outlining its expectations for good practice when businesses are making environmental claims, see our article, The ACCC’s final guidance on environmental claims: it’s all in the detail

Greenwashing also continues to be an area of focus for the Australian Government. The Senate Standing Committee on Environment and Communications is currently undertaking an inquiry into greenwashing and is due to publish a report on 28 June 2024 outlining its findings, including in relation to environmental and sustainability claims made by companies, the impact of misleading environmental and sustainability claims on consumers, and legislative options to protect consumers from greenwashing in Australia.

The rest of the world (but really, it's all happening in Europe)

Regulators globally continue to take action to combat greenwashing (including the Securities and Exchange Commission in the United States, which has to date issued the largest fines). 

Consumer regulators in Europe are particularly active. For example, on 30 April 2024, the European Commission announced that it and certain EU Consumer authorities had sent letters to 20 airlines identifying potentially misleading green claims in breach of the Unfair Commercial Practices Directive. If the airlines did not take the necessary steps within 30 days to address the concerns raised in the letters, the EU Consumer authorities could take further enforcement action, including imposing sanctions. The complaints focused on claims made by airlines that the CO2 emissions caused by a flight could be offset by climate projects or using sustainable fuels. Greenwashing risk in the aviation industry is particularly acute given the challenges around the use and characterisation of offsets. In March 2024, in the first successful greenwashing case in the aviation industry, a Dutch court found that KLM contravened EU consumer law by making misleading vague and general statements about how its flights were environmentally friendly. 

Although regulators are not the only stakeholders entities have to contend with; consumers are looking at different avenues to hold companies to account. The case against KLM was brought by a Dutch NGO. And at the beginning of June (just after the UK FCA’s anti-greenwashing rule came into effect), it was reported that a UK consumer body wrote to the UK FCA, Competition and Markets Authority and Advertising Standards Authority, calling for an investigation into greenwashing at five large UK high street banks (Barclays, HSBC, Santander, NatWest and Lloyds). 

For a practical overview of the rapidly evolving landscape of sustainability regulation, policy and practice, including in relation to climate litigation, please see Gilbert + Tobin x BWD Sustainability Insights.