SEC and ASIC crack down on greenwashing

August 16th, 2023

The Australian and US national financial regulators are taking legal action against companies accused of greenwashing funds and misleading investors.

The Australian Securities and Investment Commission (ASIC) and the US Securities and Exchange Commission (SEC) have both commenced proceedings against companies relating to their ESG investment marketing.

SEC lawyers have sent document requests, including subpoenas, to several asset managers. It is investigating a range of areas, including conventional funds that have been retooled as ESG funds, according to the Financial Times.

The move follows the SEC establishing, in March 2021, the Climate and ESG Task Force to identify ESG-related misconduct.

This will be the first ESG case from the taskforce, led by Kelly L. Gibson, the acting deputy director of enforcement in 2023, following major cases against BNY Mellon Investment Adviser and Goldman Sachs Asset Management in 2022.

The SEC has not revealed which asset managers have received requests and declined to comment.

Similarly, the ASIC has commenced civil penalty proceedings against Active Super, a superannuation fund with approximately AUD $13.5bn in superannuation assets, for misrepresenting its funds.

Active Super claimed that it eliminated investments that posed too great a risk to the environment and the community, such as tobacco manufacturing, oil tar sands and gambling, and that it had added Russia to their list of excluded countries, following its invasion of Ukraine.

However, the ASIC alleges that between 2021 and 2023 Active Super held 28 holdings, either directly or indirectly, which exposed members to securities it claimed to restrict. These included Gazprom PJSC and Rosneft Oil Company, both Russian entities, and several gambling companies including Skycity Entertainment Group Limited and PointsBet Holdings Limited.

ASIC Deputy Chair Sarah Court said: “When making claims super funds must have evidence to back their claims and ensure they are not promising exclusions that they cannot guarantee.”

This is ASIC’s third greenwashing civil penalty proceeding, and comes just one month after the regulator filed a lawsuit against Vanguard’s Australian entity for not applying appropriate ESG filters on some of its supposedly ethical funds.