Mercer Australia has copped an A$11.3 million fine in a “landmark” greenwashing court action set to shake-up product-labelling practices on both sides of the Tasman.
While Mercer admitted to the charges laid last year relating to environmental, social and governance (ESG) claims in its ‘Sustainable Plus’ fund range, the Australian High Court opted to impose a multi-million dollar penalty.
In the ruling handed down last week, Justice Horan noted the “serious” breaches “arose from failures by Mercer to implement adequate systems to ensure that ESG claims in relation to its superannuation products were accurate, and to monitor and enforce the application of any sustainability exclusions associated with such ESG claims”.
He said the case highlights “the seriousness of the contraventions admitted by Mercer, and demonstrate the importance of imposing pecuniary penalties in an amount that will serve as a general deterrent to any other person from engaging in similar conduct, particularly in the superannuation industry.
“The outcome of enforcement proceedings such as the present case should send a clear signal to AFSL [Australian Financial Services Licence] holders and other market participants to ensure transparency and accuracy when making any ESG claims, and to exercise diligence in adhering to such claims.”
Mercer NZ also offers funds under the ‘Sustainable Plus’ brand that were not captured by the court action initiated by the Australian Securities and Investments Commission (ASIC).
In a statement at the time, Mercer NZ said its Sustainable Plus products are “primarily governed” here “and managed and implemented by the New Zealand investment team”.
However, the successful ASIC legal action against Mercer – its first greenwashing case to reach civil courts – will likely prompt product reviews in the NZ industry, too, given the close relationship between both regulators and commercial entities in both countries.
The Financial Markets Authority (FMA) issued anti-greenwashing guidance in 2020 but has yet to haul any provider to court over alleged breaches. ASIC also published a greenwash information sheet for the financial services sector in 2022.
In a statement last week, Sarah Court, ASIC deputy chair, said the Mercer result sends “a strong example to the financial services industry of the greenwashing action we will take”.
“We will continue to monitor the market for ESG-related claims that cannot be validated by evidence to ensure the market is fair and transparent,” Court said.
ASIC has two more greenwashing court penalty decisions pending against Active Super and Vanguard.
The Australian regulator has also pinged various entities fines totalling more than A$270,000 for alleged greenwash activities including Tlou Energy, Diversa, Black Mountain Energy, Future Super, Morningstar and Vanguard.