October 2024 ESG Policy Update Australia
Australian Update:
A hefty AU$12.9 million penalty was handed to a large superannuation trustee by the Federal Court on 25 September 2024, marking the highest penalty imposed for greenwashing conduct to date. This ruling follows an AU$11.3 million penalty imposed on Mercer Superannuation (Australia) Limited earlier in August this year, after the trustee admitted to making misleading statements regarding the sustainable nature of certain superannuation investment options.
Justice Michael O’Bryan found that the trustee in question had made misleading claims about an “ethically conscious” fund, violating sections 12DF(1) and 12DB(1)(a) and (e) of the Australian Securities and Investments Commission Act 2001 (Cth).
The misleading claims included representations in media releases, YouTube videos, and presentations at FNN Fund Manager events, all conveying the idea that the fund offered an ethically conscious investment opportunity by tracking the Bloomberg SRI Index. However, it was found that not all securities in the index were researched and screened against environmental, social, and governance (ESG) criteria, as claimed.
Justice O’Bryan determined that the trustee’s misrepresentations enhanced its ability to attract investors to the fund and build a reputation as a provider of ESG-focused investment funds. Considering the seriousness of the conduct, the penalty of AU$12.9 million was deemed appropriate as a deterrent.
In a separate development, ASIC released an updated Regulatory Guide providing guidance for participants in the carbon market to determine if they need an Australian financial services license (AFSL). The guide clarifies that Australian Carbon Credit Units (ACCUs) and safeguard mechanism credit units (SMCs) are considered financial products, requiring an AFSL for certain activities. It also offers additional guidance on when advice in the carbon market may be considered financial product advice.
Furthermore, the inaugural Global Nature Positive Summit, hosted by the Australian and New South Wales Governments, aimed to drive private sector investment in nature and promote activities to protect and repair the environment. The Australian government’s commitment to a three-stage approach, including establishing the Nature Repair Market and introducing environment protection legislation, reflects efforts to improve ecosystem diversity and resilience.
Overall, these developments highlight the growing focus on transparency and accountability in the financial and environmental sectors, underscoring the importance of accurate and ethical practices in the industry.
