October 2024 ESG Policy Update in Australia

Australian Update:

A significant penalty of AU$12.9 million was recently imposed on a large superannuation trustee by the Federal Court for misleading conduct known as greenwashing. This penalty tops the previous record of AU$11.3 million imposed on Mercer Superannuation (Australia) Limited earlier this year for similar misleading statements about the sustainable nature of its investment options.

The trustee in question made misleading claims about an “ethically conscious” fund, violating certain sections of the Australian Securities and Investments Commission Act 2001. These claims included representations in media releases, YouTube videos, and at a Fund Manager event, as well as in Product Disclosure Statements (PDS) and on their website. These representations were found to be misleading because the fund’s screening process against environmental, social, and governance criteria had limitations and included issuers that violated these criteria.

The Federal Court found that the trustee’s conduct was serious and had been ongoing for two and a half years, involving senior employees in the preparation of misleading disclosures. The penalty amount of AU$12.9 million was considered appropriate to strike a balance between deterrence and severity.

In a separate update, ASIC released updated guidance for participants in the carbon market, clarifying when an Australian financial services licence (AFSL) is required. The guide addresses legislative reforms enabling the issuance of safeguard mechanism credit units and reaffirms that Australian Carbon Credit Units (ACCUs) and safeguard mechanism credit units are considered financial products.

Lastly, the Global Nature Positive Summit hosted by the Australian and New South Wales Governments aimed to drive private sector investment in nature and enhance environmental protection efforts. This summit followed Australia’s commitment to a three-stage approach outlined in its Nature Positive Plan, including the establishment of the Nature Repair Market and Environment Protection Australia. Leaders at the summit discussed ways to realize these global commitments and improve the diversity and resilience of ecosystems.