Key Takeaways

The Australian Securities and Investments Commission (ASIC) just wrapped up a landmark case against Mercer Group, the superannuation fund, for greenwashing. Mercer misled the public with false and misleading claims about their sustainable investment options and was ordered to pay a whopping $11.3 million penalty. They also have to acknowledge this wrongdoing on the sustainable investments page of their website. This case is significant enough that your board will definitely be talking about it.

The decision highlights the critical importance of making accurate and substantiated environmental, social, and governance (ESG) claims. And the key takeaway is quite straightforward: Tell the truth.

If you plan to use the word "sustainability" (or any similar terms) in external marketing, especially when appealing to environmentally-conscious customers, consult with your legal team first.

Here’s a breakdown of the case, what Mercer admitted, and key takeaways for your teams (whether you're in finance or not). If you want the full scoop, here’s the judgment (brag to legal if you actually read this).

What Was the Case About?

ASIC's case against Mercer centred on misleading sustainability claims regarding its "Sustainable Plus" investment options. These options were marketed as excluding investments in carbon-intensive fossil fuels, alcohol, and gambling. However, ASIC found that this wasn’t the case and Mercer acknowledged this. For context, an article was released by Market Forces back in 2022 that stated:

“Super fund Mercer, for example, claims its ‘Sustainable Plus’ options exclude thermal coal companies, yet the ‘Sustainable Plus Growth’ option is invested in Whitehaven Coal and New Hope Corporation, among several other companies expanding the scale of the climate wrecking thermal coal industry. In fact, 7.45% of Mercer Sustainable Plus Growth’s listed equities investments are in companies that appear on the Climate Wreckers Index due to their fossil fuel expansion plans. This is higher than the average of default options Market Forces recently analysed (6.26%).”

What Did Mercer Do?

Mercer marketed its "Sustainable Plus" options as suitable for investors committed to sustainability. Mercer suggested that these products allowed investors to align their financial goals with personal ethical standards by avoiding specific sectors​. They said things like this on the website:

“We invest your money sustainably to help maximise your returns, make a positive impact and be part of a brighter, more sustainable future.”

“We take a holistic, sustainable approach to your investments.”

“Although all our investment options are invested sustainably, we offer Sustainable Plus investment options, which go beyond the standard approach to sustainable investing.”

“These options have a higher proportion of sustainability-themed assets and exclude companies involved in alcohol production, carbon intensive fossil fuels, gambling and pornography.”

What Did Mercer Admit?

“Mercer admits that, during the relevant period, it did not ensure that all asset classes in which the Sustainable Plus Options were permitted to invest were excluded from investing in companies involved in, or deriving profit from, the production or sale of alcohol, gambling or the extraction or sale of carbon intensive fossil fuels.”  

This is from the judgment and if your first reaction is “omg this could be us” - then you probably join 90% of corporate teams thinking the same thing.

“Mercer admits that its decision-making process in relation to the making of the Five Online Statements was inadequate. Among other things, Mercer’s delegations and approvals policy did not prescribe a process for approving website communications other than updates to Mercer’s PDS, and Mercer had no formal process to mandate or monitor the use of its “Marketing Checklist” (which set out a list of questions to ensure that information was accurate and complete and that there were “reasonable grounds” for making all representations) or its “Legal & Compliance Checklist” (which comprised a table to be completed and sent to the legal and compliance teams when seeking approval for marketing communications). In particular, Mercer has not located any Marketing Checklist or Legal & Compliance Checklist prepared in respect of any of the Five Online Statements

Key Takeaways from the Judgment

When you make claims about sustainability or ESG - follow the process

Whether you're working on a website, packaging, customer emails or a Times Square Billboard...consider this stuff, properly. This probably happened because the team who came up with that copy on the website was not diving into the weeds on the investment policy, the current portfolio, the risks, the expectations - BUT SOMEONE NEEDS TO.

That someone is likely your legal team who have a process for this (or they're creating one right now, nothing like a federal court case to freshen everything up).

You can help by making sure your teams follow it.

What might seem impressive when you're making sustainability claims can lose its charm pretty fast when you have to publicly admit you've been found guilty of greenwashing by a Federal Court.

Value Customer Trust and Confidence in Your Company 

Just, respect the customer. Especially when they're trying to make values based decisions.

“As the parties accept, greenwashing practices have the potential to reduce consumer confidence in environmental, social and corporate governance (ESG) claims, which undermines the efforts of businesses that are pursuing ESG goals accurately and fairly. In addition to harming consumers by depriving them of information relevant to making choices in accordance with environmental, social and ethical values or objectives, false or misleading ESG claims may confer unfair competitive advantages on companies in marketing their financial products and services.” 

“As discussed above, it is vital that consumers in the financial services industry can have confidence in ESG claims made by providers of financial products and services. As is the case in many other industries, consumers may place great importance on ESG considerations when making investment decisions. Any misrepresentations in relation to ESG policies or practices associated with financial products or services, whether as an aspect of “greenwashing” practices or otherwise, undermines that confidence to the detriment of consumers and the industry generally.”

No need for this to become fight club.

What’s the first rule of fight club? You do not talk about fight club. That’s not the intention of regulators when it comes to sustainability. There is no problem talking about your sustainability efforts and progress but it is essential that those comms are true, accurate and do not mislead your customers.

How Sumday helps 

If you're making sustainability claims in terms of carbon emissions, carbon neutrality, net zero, or carbon positive and you don’t have a carbon baseline prepared in line with the standards, that’s a red flag. Sumday helps companies upskill their teams, complete audit-ready accounting, and engage with customers and suppliers to understand their emissions. It’s crucial to know where your company and your value chain stand, which informs the kind of claims you are comfortable making in this space.