Australia: Three wins in a row - Active Super to pay $10.5 million penalty in ASIC’s third greenwashing action

On 18 March 2025, the Federal Court of Australia ordered LGSS Pty Ltd as trustee for Active Super fund (Active Super) to pay a pecuniary penalty of $10.5 million for making false or misleading representations about its green and environmental, social and governance (ESG) credentials.

Significantly, this decision marks ASIC’s third successful greenwashing civil penalty action to date, following the $11.3 million penalty ordered against Mercer Super in August 2024 and the $12.9 million penalty ordered against Vanguard Investment in September 2024.

In this article, we explore how the Court determined the appropriate penalty amount for greenwashing and provide key takeaways for businesses operating in Australia as we see a growing trend in greenwashing enforcement actions.

Background

In August 2023, ASIC commenced civil penalty proceedings in the Federal Court of Australia, alleging that Active Super breached sections 12DB(1)(a) and 12DF(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) by making false or misleading representations about its green and ESG credentials.

Active Super denied liability, contending that:

• ·none of the representations ASIC relied on was conveyed; or alternatively
• the representations, if made, were not made “in trade or commerce” and were as to future matters made on reasonable grounds.

In June 2024, the Court published its decision on liability, holding that Active Super made false or misleading marketing and greenwashing representations in breach of the ASIC Act. Active Super was found to have made representations in its marketing that it had eliminated investments in gambling, coal mining, oil tar sands and Russian companies when in fact, it directly and indirectly (via managed funds or ETFs) held investments in them from February 2021 to June 2023.

Determining the appropriate penalty amount for greenwashing

Following the decision on liability, the Court held that the appropriate penalty amount was $10.5 million. This amount was determined by reference to various factors, some of which we have highlighted below.

Each party’s proposed penalty

The Court observed that the parties were “poles apart” on the appropriate penalty amount. ASIC proposed that the amount should be $13.5 million, while Active Super proposed that the penalty should be fixed by reference to an amount that ensures the penalty will not have any direct negative impact on its members, i.e., $2.456 million.

ASIC’s two previous greenwashing actions

Although both parties referenced ASIC’s two previous greenwashing actions as indicators of an appropriate penalty amount, the Court decided that “neither of the Vanguard or Mercer cases requires particular consideration” because “there is little utility in reference to the other cases with different facts”.

Nature and extent of any loss

While Active Super’s breaches do not appear to have caused any financial loss to investors, the Court stated that “the real harm of greenwashing is not the harm to an individual investor, but rather the harm generally to ESG programs as a whole and investor confidence in them”. Further, Active Super potentially gained several benefits in connection with its greenwashing claims, like attracting investors more effectively than it would otherwise and maintaining a reputation as a superannuation funds provider with green and ESG credentials. Investors, therefore, “lost the opportunity to invest in accordance with their investment values”.

Impact of the penalty on members of Active Super

Active Super argued that a penalty more than $2.456 million would reduce the pool of funds available for investment and in turn, reduce the returns that its fund members rely on for financial security in their retirement. Although the Court acknowledged that the impact of the penalty on fund members is a relevant factor, Active Super’s argument and proposed penalty amount were ultimately rejected. The Court explained that a court’s task is to determine what is an appropriate penalty to protect the public interest by deterring future breaches of the relevant law; it is not to fix a penalty by reference to amount that guarantees fund members will suffer no indirect loss by a reduction in their returns.

Deterring greenwashing

The Court plainly stated that Active Super’s breaches were “serious”, that it was not more serious because it was colloquially called “greenwashing” (as ASIC contended) or less serious because ASIC had already taken actions against other parties for similar conduct (as Active Super contended).

Key takeaways

Winning three greenwashing civil penalty actions in a row and securing heavy pecuniary penalties for each are clear indicators that ASIC will continue to closely monitor and tackle greenwashing and misleading ESG claims, consistent with its latest enforcement priorities.

On top of this, earlier this year, the ACCC agreed to a $8.25 million penalty against Clorox for alleged greenwashing practices in its first greenwashing civil penalty action.

Considering the growing trend of greenwashing enforcement actions and recent Federal Court decisions, business operating in Australia should, among other things:

• have in place properly functioning systems and processes designed to ensure that any environmental and sustainability claims are not false or misleading;
• provide training that focuses on ESG matters and consumer law obligations; and
• have evidence to back up any environmental and sustainability claims made by the business.

Please reach out to Bird & Bird’s greenwashing experts for advice on how to mitigate these risks and ensure compliance with greenwashing regulations.

This article was written with the assistance of Jonathan Wong.