Australian Corporate Regulators Continue to Target Environmental Claims and Greenwashing in Enforcement Activities

ESG-related enforcement remains a top priority and focus for Australia's corporate regulators. Since our last update, there has been a steady stream of enforcement activity aimed at climate-related representations and greenwashing conduct, including several cases advancing through the courts. In June 2024, the Federal Court of Australia ruled in favor of the Australian Securities and Investments Commission ("ASIC") in a greenwashing action against a superannuation fund. This is the third action of its kind commenced since 2023 by ASIC and the second in which the Court has ruled in favor of the regulator. Australia's antitrust and consumer law regulator, the Australian Competition and Consumer Commission ("the ACCC"), has also become increasingly active in this space, having singled out environmental and sustainability claims as one of its enforcement and compliance priorities for 2024/25.

This article provides a brief overview of recent climate-related enforcement actions by these Australian regulators. Looking ahead, it is very likely that enforcement efforts in this area—and with respect to environmental and sustainability claims more broadly—will continue, with the ACCC and ASIC having affirmed their commitments to their ongoing investigation and prosecution of greenwashing-related conduct.

Recent Climate Change-Related Greenwashing Actions in Australian Courts 

As discussed in a prior edition of The Climate Report, in Australian Securities and Investments Commission v LGSS Pty Ltd (Federal Court of Australia, Proceeding No. NSD847/2023), ASIC commenced penalty proceedings against LGSS Pty Ltd, the trustee of superannuation fund Active Super ("Active Super"), with respect to certain representations regarding Active Super's ESG credentials contained in its marketing and policy materials. 

In its ruling, the court declared that Active Super contravened the Australian Securities and Investments Commission Act 2001 (Cth) by making false or misleading representations, and engaging in conduct liable to mislead the public, in relation to investments made by the superannuation fund. The representations in question concerned the elimination of investments in gambling, coal mining, oil tar sands projects, and companies that derived revenue from Russia. They were made in a range of statements published on Active Super's website and social media accounts, as well as in reports and fact sheets made available on the website. 

As to the climate-related claims, the court found that Active Super made representations that it would not make or hold investments in companies that: (i) derive any revenue from oil tar sands projects; or (ii) derive one-third or more of their revenue from coal mining. The court held that, contrary to those representations, during the relevant period, Active Super, in fact, held direct and indirect investments in companies that derived revenue from oil tar sands projects and in companies that derived more than one-third of their revenue from coal mining. The court has not yet fixed a date for the hearing of ASIC's claims for pecuniary penalties (which are expected to be significant), adverse publicity orders, and injunctive relief. 

Regulatory Enforcement Actions Continue in Response to Climate-Related Claims 

In addition to climate-related lawsuits, both the ACCC and ASIC have continued to deploy a range of enforcement and compliance methods in response to environmental and sustainability claims, particularly through sweeps of public statements and cautionary investigations, the use of infringement notices (with penalties), and court-enforceable undertakings (commitments). 

For example, in May 2024, ASIC issued two infringement notices to Fertoz Limited ("Fertoz"). The infringement notices related to climate-related claims contained in a presentation that was published to the Australian Securities Exchange ("ASX") in November 2023. Fertoz, an ASX-listed company that specializes in fertilizer mining, production, and supply, published a presentation that included an update on a reforestation project in the Philippines. In the infringement notices, ASIC alleged that Fertoz made false or misleading statements with respect to when it expected to secure funding arrangements and commence initial planning for the project. According to ASIC, Fertoz had no reasonable basis to conclude that it was possible to achieve these objectives by the stated timeframes. ASIC asserted that this was because, at the time of publication, Fertoz had ceased discussions with its potential partners and had not secured sufficient funding to progress the project. This case is a timely reminder of the importance of ensuring that there is a reasonable basis for any climate or sustainability-related claims (especially forward-looking statements) included in updates to the market. 

Claire Goulding, an associate in the Sydney Office, assisted with the preparation of this article.

Read the full Climate Report.