Greenwashing Penalty Sends Shockwaves Through ESG Investing

The Australian Securities and Investments Commission (ASIC) has delivered a landmark ruling against Active Super, a major superannuation fund, for making misleading environmental, social, and governance (ESG) claims. The $10.5 million penalty—the third such penalty for greenwashing—signals a turning point in regulatory scrutiny of ESG marketing. For investors, this case underscores the growing risks of relying on ESG branding without verifying the substance behind it.

The Case Against Active Super: False Claims and Systemic Failures

Active Super marketed itself as an “ethical” fund, publicly vowing to avoid investments in sectors like coal mining, Russian energy companies, and gambling. Yet internal records revealed ongoing holdings in controversial entities such as Whitehaven Coal Ltd, Gazprom PJSC, and Skycity Entertainment Group. These contradictions persisted for over two years, even after Russia’s invasion of Ukraine, which Active Super had cited as a reason to divest from Russian assets.

The Federal Court found that Active Super’s claims were not only false but also systematically enabled by poor governance. Senior management failed to implement basic checks to ensure investments aligned with ESG policies. Justice O’Callaghan condemned the fund’s actions as “contrived,” noting that the misleading statements likely attracted investors who prioritized ethical values—a violation of trust that deprived them of meaningful choice.

ASIC’s Aggressive Stance on ESG Integrity

This case is part of ASIC’s broader campaign to combat greenwashing. Deputy Chair Sarah Court emphasized that the penalty “sends a strong message” to firms overstating their ESG commitments. The regulator’s focus on Section 18 of the Australian Consumer Law, which prohibits misleading conduct regardless of intent, means even unintentional misstatements could lead to fines.

The escalating penalties reflect growing regulatory resolve. For investors, this raises the stakes: funds and companies with vague or unverified ESG claims now face tangible financial risks.

Implications for Investors: Due Diligence is Non-Negotiable

Active Super’s penalty affects not only its reputation but also its 86,547 members. The fund managed $14.7 billion as of June 2024, much of it likely invested in assets that clashed with its ethical branding. Investors in ESG-focused funds must now ask: How rigorously are these claims verified?

The case highlights the importance of third-party audits, clear ESG policy documentation, and transparency about exclusions. For instance, while Active Super claimed to avoid coal mining, its holdings in Whitehaven Coal—a company responsible for 10% of Australia’s coal exports—suggest a lack of alignment between rhetoric and reality.

Market Impact: A Shift Toward Accountability

The ruling may accelerate a market-wide reckoning with ESG authenticity. Funds like Active Super, which merged with Vision Super in 2025, now face heightened scrutiny. Investors should scrutinize:
- ESG policy specifics: Are exclusions clearly defined and consistently applied?
- Compliance systems: Does the fund have independent oversight to prevent misstatements?
- Transparency: Are holdings regularly disclosed in ways that align with stated values?

The $10.5 million penalty—equivalent to 0.07% of Active Super’s assets under management—may seem small, but the reputational damage is far greater. For comparison, the average ESG fund’s management fee is ~0.5%, meaning the penalty equates to roughly two months’ revenue. This financial hit, coupled with lost member trust, serves as a cautionary tale.

Conclusion: The Era of Greenwashing is Ending

ASIC’s actions demonstrate that regulators are no longer tolerating vague or misleading ESG claims. Investors must treat ESG marketing with skepticism, demanding evidence of compliance and consistency.

The Active Super case sets a precedent: funds and companies making ESG claims will face penalties proportional to the harm caused. With 45,621 members misled via email campaigns and $10.5 million extracted from the fund’s resources, the ripple effects are clear.

For investors, the takeaway is stark: ESG branding without substance is a liability. As ASIC’s penalties grow steeper, due diligence on ESG authenticity is no longer optional—it’s essential to avoid the next scandal.

The writing is on the wall: in the ESG race, truthfulness—not marketing—will determine survival.