Corporate pension fund Mercer Superannuation misled members by investing in coal and other fossil fuels, along with alcohol and gambling stocks, in a fund that promoted its sustainable credentials, the corporate regulator has alleged.
The Australian Securities and Investments Commission has started legal proceedings against Mercer in its first court action over alleged “greenwashing”, a term that describes misleading claims made about a product’s environmental and sustainable credentials.
According to Asic, Mercer’s Sustainable Plus investment option invested in 15 fossil fuel companies, including Whitehaven Coal and BHP; 15 alcohol companies such as Budweiser Brewing and Heineken; and 18 gambling stocks, including Crown Resorts and poker machine maker Aristocrat Leisure.
This was despite Mercer marketing the investment option as suitable for members who are “deeply committed to sustainability” because the fund excluded investments in companies involved in carbon-intensive fossil fuels.
There were also exclusions for companies involved in alcohol production and gambling.
“There is increased demand for sustainability-related financial products, and with that comes the growing risk of misleading marketing and greenwashing,” Asic deputy chair Sarah Court said in a statement on Tuesday.
“If financial products make sustainable investment claims to investors and potential investors, they need to reflect the true position. If investments in certain industries like fossil fuels are said to be excluded, this promise must be upheld.”
Mercer, owned by US-listed professional services firm Marsh McLennan, is a major super fund manager operating in Australia, overseeing $27.5bn in assets for more than 180,000 members across a range of investment options.
Mercer confirmed it was subject to civil proceedings.
“Mercer has cooperated with Asic throughout its investigation, and will continue to carefully consider Asic’s concerns with respect to this matter,” the fund said.
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“It would be inappropriate to comment further as the matter is now before the courts.”
The corporate regulator has issued infringement notices to companies over alleged greenwashing in the past, but had not previously pursued legal action. It is seeking penalties and an injunction against Mercer from continuing to make any of the alleged misleading statements on its website.
The action comes amid a wider crackdown on greenwashing, with the competition watchdog recently announcing it would scrutinise climate claims, including the use of carbon credits, as an enforcement priority.
The Australian Competition and Consumer Commission has said that it was an important area of enforcement because an increasingly large number of consumers were making purchasing decisions based on products’ sustainability credentials.