ASIC succeeds in its third civil penalty prosecution for greenwashing, with the Federal Court imposing a $10.5 million penalty

Court findings

On 18 March 2025, his Honour Justice O’Callaghan imposed a civil penalty of $10.5 million on the trustee of a superannuation fund, after finding that the fund had made false or misleading statements to current or potential members of the fund to the effect that:

1. it eliminated from the fund, investments that posed “too great a risk” to the environment and the community, including gambling, coal mining, tobacco and oil tar sands; and
2. following the invasion of Ukraine in February 2022, the fund would divest its Russian investments and make or hold no further investments in Russia.

His Honour found that, contrary to these representations, the fund held direct and indirect investments in companies they claimed they did not hold investments in (including Pointsbet Holdings Ltd, Tabcorp Holdings Ltd, Shell Plc and various Russian oil and gas companies). Consequently, the representations amounted to contraventions of ss 12DB(1)(a) and 12DF(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).

Quantum of penalty

The fund submitted that the penalty imposed against it should not exceed $2.456 million, as a larger penalty would reduce the pool of funds available for investment and consequently reduce returns to members, such that the punitive effect would fall directly on fund members. Justice O’Callaghan rejected this submission, emphasising the interest in protecting the public interest by imposing a penalty significant enough to deter future contraventions.

In assessing the quantum of the penalty that should be imposed, Justice O’Callaghan considered:

• The nature of the conduct – namely, that the fund had engaged in eight separate courses of conduct, or series of statements, over the course of two and a half years which amounted to serious contraventions of the ASIC Act.
• The role of senior management – importantly, the fund accepted that its senior management were responsible for the failure to prevent the misleading representations.
• The harm caused by the conduct – specifically, while the contraventions did not appear to have caused investors any financial loss, investors did lose the opportunity to invest in accordance with their investment values. In any event, his Honour described the “real harm” of greenwashing is not that suffered by an individual investor but “the harm more generally to ESG programs as a whole and investor confidence in them”.
• Any benefit derived by the fund from the contravening conduct – his Honour found that the fund potentially benefitted from its misleading, including in relation to its ability to attract investors to the fund and maintenance of its reputation as a provider of investment funds with ESG characteristics.
• The extent to which the fund co-operated in the investigation – although the fund had taken steps to improve its compliance systems and co-operated with ASIC by attending two voluntary conferences, it had not been wholly co-operative as his Honour considered that it ran a number of contrived arguments in its defence at trial.

This decision represents the third penalty imposed on financial services providers for contraventions of the ASIC Act arising from greenwashing. In September 2024, the Federal Court imposed penalties of $12.9 million against Vanguard Investments Australia and $11.3 million against Mercer Superannuation (Australia) Ltd in relation to claims about the sustainable or ethical features of those providers’ respective financial products.

Referring to those earlier penalties, his Honour acknowledged authority that while “comparables may offer broad guidance”, the Court was not required to give particular consideration to the penalties imposed against Mercer and Vanguard in light of the variety of facts and circumstances between each case.

Clear warning to avoid greenwashing activity

This latest judgment is a reminder of both ASIC’s commitment to identify and prosecute instances of greenwashing in the Australian market and the Federal Court’s willingness to impose substantial penalties where greenwashing allegations are established. It is now clear that conduct amounting to greenwashing will not be tolerated by the corporate regulator, particularly in the context of superannuation and other financial services.

Organisations that make marketing claims about the sustainable, environmentally friendly or ethical characteristics of their goods and services should carefully consider whether those claims are supported by clear evidence. To avoid liability associated with greenwashing, it is critical that potential or current customers are not actually or potentially confused or misled by sustainability-related marketing claims.

If you would like to discuss the latest decision from the Federal Court or its implications for your organisation, please do not hesitate to contact Susan Goodman. If you found this insight article useful and you would like to subscribe to Gadens’ updates, click here.

Authored by:
Susan Goodman, Partner
Rebecca Dawes, Senior Associate
Ahmed El-Jaam, Lawyer
Wesam Chami, Lawyer