1. Executive summary
In Australian Securities and Investments Commission v LGSS Pty Ltd (No 3) [2025] FCA 205, O’Callaghan J imposed total pecuniary penalties of $10.5 million on LGSS Pty Ltd, the former trustee of Local Government Super, also known as Active Super, for greenwashing contraventions involving false or misleading representations about the fund’s environmental, social and governance investment restrictions.
Between 1 February 2021 and 30 June 2023, LGSS represented through its website, member communications, product disclosure material, responsible investment publications and a media interview that Active Super did not invest, or had eliminated investments, in gambling, coal mining, oil tar sands and Russian entities. Those representations were false or misleading because the fund continued to hold direct or indirect investments in companies associated with those sectors, including SkyCity Entertainment Group, PointsBet, Whitehaven Coal, Coronado Global Resources, ConocoPhillips, Shell, Gazprom and Sberbank.
The Court imposed penalties across eight courses of conduct:
| Publication or communication | Penalty |
|---|---|
| Website statements | $3,000,000 |
| Member email and reproduced website statement | $750,000 |
| Impact report | $750,000 |
| Investment Magazine interview | $250,000 |
| Sustainable and responsible investment policy | $2,000,000 |
| Responsible investment report | $750,000 |
| 2021 PDS fact sheet | $1,500,000 |
| 2022 PDS fact sheet | $1,500,000 |
| Total | $10,500,000 |
The Court also ordered LGSS to:
- publish an adverse publicity notice;
- email the notice to all Active Super members as at 20 June 2024;
- display it prominently on specified webpages for six months; and
- pay ASIC’s costs.
The decision is important for superannuation trustees, fund managers and AFS licensees because it confirms that:
- ESG claims must accurately reflect the fund’s actual portfolio, including indirect and pooled-fund exposures;
- absolute statements such as “no investment”, “eliminated” or “out” should not be used where exceptions, thresholds or implementation delays exist;
- greenwashing harm extends beyond direct financial loss and includes lost investor choice and damage to confidence in ESG investment products;
- product disclosure documents, policies, websites, reports, emails and executive interviews form part of the same regulatory risk perimeter;
- senior management is responsible for ensuring that ESG marketing is supported by effective investment-governance and disclosure controls;
- contested liability and implausible forensic positions may reduce the mitigating value of cooperation; and
- the possible impact of a penalty on superannuation members is relevant, but does not require the Court to eliminate all indirect member consequences.
2. Citation and context
Case: Australian Securities and Investments Commission v LGSS Pty Ltd (No 3)
Neutral citation: [2025] FCA 205
Court: Federal Court of Australia
Judge: O’Callaghan J
Judgment and orders: 18 March 2025
Hearing: 17 December 2024
Proceeding: NSD 847 of 2023
Registry: New South Wales
Nature of decision: Penalty, adverse publicity and costs judgment following contested liability findings.
The penalty judgment followed:
- Australian Securities and Investments Commission v LGSS Pty Ltd [2024] FCA 587, which determined liability; and
- Australian Securities and Investments Commission v LGSS Pty Ltd (No 2) [2024] FCA 665, which made declarations of contravention.
Those earlier decisions established that LGSS contravened ss 12DB(1)(a) and 12DF(1) of 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 financial services.
3. The greenwashing conduct
LGSS made the relevant statements through:
- Active Super’s website;
- an email sent to members and reproduced online;
- the fund’s impact report;
- an interview with its chief executive officer published in Investment Magazine;
- three versions of its sustainable and responsible investment policy;
- its responsible investment report; and
- its 2021 and 2022 PDS fact sheets.
The statements represented that Active Super excluded, avoided or had eliminated investments associated with gambling, coal mining, oil tar sands and Russia. The Court had previously found that these representations were inconsistent with investments actually held by the fund.
The conduct was not confined to a single marketing document or isolated error. It extended across approximately two and a half years and appeared in multiple formal and informal communications directed to members and the public.
Audience and reach
The evidence included the following exposure data:
- one website statement was viewed approximately 991 times;
- another website statement was viewed approximately 5,807 times;
- the SRI policy page was viewed approximately 312 times;
- the 2021 and 2022 PDS fact sheet pages were viewed approximately 367 and 94 times respectively;
- the member email was sent to 45,621 members and opened by 26,143;
- the responsible investment report was downloaded 71 times; and
- the impact report was estimated to have been downloaded approximately 616 times.
These figures were estimates and included possible repeat views and views by ASIC. They nevertheless demonstrated that the representations were disseminated widely, particularly through the member email.
4. Contraventions and findings
| Act | Provision | Prohibition | Conduct | Finding |
|---|---|---|---|---|
| ASIC Act 2001 (Cth) | s 12DB(1)(a) | False or misleading representation that financial services have particular characteristics, benefits or qualities | Representations that Active Super excluded or had eliminated investments in gambling, coal mining, oil tar sands and Russian entities | Contraventions established |
| ASIC Act 2001 (Cth) | s 12DF(1) | Conduct liable to mislead the public as to the nature, characteristics or suitability of financial services | Publication of ESG and responsible-investment representations inconsistent with the fund’s actual holdings and investment processes | Contraventions established |
The Court treated the contraventions as eight courses of conduct corresponding to the different documentary and communication sources. This avoided an artificial transaction-by-transaction penalty calculation while preserving the seriousness and breadth of the misconduct.
5. Nature of the false or misleading representations
Gambling
Active Super represented that gambling investments were excluded, despite investments in companies including SkyCity Entertainment Group Ltd and PointsBet Holdings Ltd.
Coal mining
The fund represented that coal mining investments were excluded or restricted, despite investments including Whitehaven Coal Ltd and Coronado Global Resources Inc.
Oil tar sands
Active Super represented that it had eliminated or excluded investments associated with oil tar sands, despite holdings including ConocoPhillips and Shell Plc.
Russia
Following Russia’s invasion of Ukraine, LGSS represented that Russia was “out” and that the fund would not invest in Russian entities. The fund nevertheless held exposure to entities including Gazprom PJSC and Sberbank of Russia, including through pooled investment arrangements.
A central compliance failure was the disconnect between the plain meaning conveyed to consumers and LGSS’s more qualified internal understanding of:
- investment thresholds;
- indirect holdings;
- pooled-fund exposure;
- overlay portfolios;
- restricted lists; and
- the time required to implement exclusions.
6. Penalty principles
Deterrence is the primary objective
The Court confirmed that specific and general deterrence are the primary, if not sole, purposes of civil penalties under s 12GBB. The penalty must be sufficient to prevent the contravener and other market participants from treating non-compliance as an acceptable cost of doing business.
Financial loss is not required
ASIC accepted that the contraventions did not appear to have caused investors direct financial loss. The Court nevertheless regarded the conduct as serious.
O’Callaghan J accepted that the harm of greenwashing includes:
- depriving investors of the opportunity to make a different investment choice using accurate information;
- enhancing the contravener’s ability to attract and retain investors;
- preserving an undeserved reputation for strong ESG credentials; and
- damaging investor confidence in ESG products generally.
The decision therefore treats investor autonomy and market integrity as substantive protected interests, not merely secondary considerations where monetary loss cannot be proved.
Maximum penalties are a yardstick
The prescribed maximum is an important statutory yardstick but is not reserved only for the objectively worst conceivable case. The final penalty must bear a reasonable relationship to the maximum and be no more than reasonably necessary to secure deterrence.
Comparable cases provide limited guidance
The Court considered submissions concerning the greenwashing penalties imposed in the Vanguard and Mercer proceedings. It held that comparable cases may provide broad guidance, but penalty assessment must ultimately turn on the particular facts, contravener and conduct before the Court.
7. Impact on superannuation members
LGSS argued that the penalty should be limited to $2.456 million to avoid a direct negative impact on Active Super members.
The issue arose because:
- LGSS had insurance coverage of up to $20 million;
- insurance proceeds used to pay the penalty would generate a tax liability;
- the insurance policy did not cover that tax liability; and
- some or all of that tax burden could ultimately affect members’ retirement savings.
Section 12GBB(5)(e) required the Court to consider the impact of the proposed penalty on beneficiaries of a registrable superannuation entity. The Court did so but did not accept that the provision required a penalty to be fixed at a level producing no member impact.
The broader implication is that member impact is relevant but not controlling. Otherwise, a trustee could receive inadequate penalties for serious contraventions because the financial consequences may indirectly fall on the people the regulatory regime is intended to protect.
The adverse publicity notice was required to disclose that the penalty would be met from insurance proceeds, but that the associated capital gains tax liability might need to be met from member funds.
8. Senior management, governance and corporate culture
LGSS accepted that senior management was ultimately responsible for the absence of properly functioning systems and processes designed to ensure that ESG representations were accurate.
The Court also noted that LGSS did not adduce evidence explaining the likely causes of the misconduct. Although remediation was relevant, the absence of a clear root-cause account reduced the Court’s ability to conclude that the underlying governance failures had been fully understood and addressed.
The case demonstrates that ESG disclosure governance requires coordination across:
- investment management;
- responsible investment and sustainability teams;
- marketing and communications;
- product and disclosure teams;
- legal and compliance;
- data and investment operations;
- senior management; and
- the trustee board.
No publication should be approved without reconciling its wording against actual portfolio holdings, look-through data, applicable thresholds and implementation status.
9. Cooperation, admissions and litigation conduct
LGSS admitted that it had made the relevant statements and admitted the underlying investments and characteristics of the companies involved. It did not, however, admit liability under ss 12DB or 12DF and contested the case at trial.
O’Callaghan J considered that LGSS had advanced a number of contrived, threadbare or indefensible arguments in defending the liability proceeding. Although LGSS attended voluntary conferences with ASIC, that cooperation had to be assessed against the way it conducted the contested litigation.
The practical lesson is not that a respondent loses mitigation merely by defending a regulatory case. Rather, mitigation may be limited where the defence:
- lacks a reasonable factual or legal foundation;
- relies on artificial distinctions between direct and indirect holdings;
- advances meanings inconsistent with the ordinary language used publicly; or
- fails to acknowledge obvious discrepancies between representations and portfolio data.
10. Remediation
By April 2023, LGSS had taken measures including:
- ESG and consumer-law training for the board, executive leadership and relevant employees;
- review and amendment of website publications;
- ongoing monitoring of public disclosures against the SRI policy;
- an external PwC review of aspects of the investment-governance control framework;
- an internal review of policies and practices;
- authority for the chief investment officer to add companies immediately to the restrictions list;
- stronger verification of definitions sourced from external ESG data providers; and
- monthly monitoring of companies approaching or exceeding relevant thresholds.
The Court treated those measures as mitigating, together with LGSS’s apology, lack of prior contraventions and the reduced need for specific deterrence following the merger under which LGSS ceased acting as trustee for Active Super.
11. Penalties
| Course of conduct | Amount |
|---|---|
| Website representations | $3,000,000 |
| Member email and reproduced statement | $750,000 |
| Impact report representations | $750,000 |
| Investment Magazine representation | $250,000 |
| SRI policy representation | $2,000,000 |
| Responsible investment report representations | $750,000 |
| 2021 PDS fact sheet representation | $1,500,000 |
| 2022 PDS fact sheet representation | $1,500,000 |
| Total penalty | $10,500,000 |
The Court applied the totality principle as a final check and determined that no reduction was required.
ASIC had sought an aggregate penalty of $13.5 million. LGSS proposed $2.456 million. The Court’s $10.5 million outcome was substantially closer to ASIC’s position and reflected the duration, breadth, senior-management responsibility and market-integrity harm of the conduct.
12. Adverse publicity order
The Court ordered LGSS to publish an adverse publicity notice under s 12GLB of the ASIC Act.
The notice was required to:
- be emailed to all members of Local Government Super as at 20 June 2024;
- appear on specified Active Super or Vision Super webpages;
- remain available for six months;
- appear immediately as a picture tile headed “Notification of Misconduct by Active Super”;
- identify the misleading representations and examples of inconsistent investments;
- state the $10.5 million penalty; and
- explain the possible tax impact on members arising from the insurance proceeds.
O’Callaghan J explained that adverse publicity orders serve:
- a punitive purpose;
- deterrence and an appropriate curial response; and
- the public interest in correcting false impressions, alerting consumers and preventing repetition.
For financial institutions, corrective and adverse publicity may create consequences beyond the pecuniary penalty, including member complaints, reputational damage, capital outflows, board scrutiny and increased regulatory supervision.
13. Broader significance for ESG and greenwashing
The decision establishes a significant Australian penalty benchmark for greenwashing by a superannuation trustee.
It demonstrates that ESG representations are not aspirational branding statements insulated from financial services law. Statements about exclusions, divestment, sustainability or ethical investment are representations about the characteristics and qualities of the financial service and must be objectively supportable.
Particular risks arise where:
- marketing uses absolute language but policies contain exceptions;
- direct holdings are screened but pooled or indirect holdings are not;
- the policy definition differs from the ordinary consumer understanding;
- the fund announces a divestment before implementation is complete;
- investment data is outdated or incomplete;
- ESG data providers use classifications inconsistent with the fund’s published policy;
- portfolio holdings cross revenue or activity thresholds between review cycles; or
- executive commentary is not subject to the same verification as formal disclosure documents.
14. Relevance for superannuation trustees and AFS licensees
Trustees and licensees should treat every ESG statement as a regulated representation requiring evidence.
The relevant evidence should demonstrate:
- the meaning intended to be conveyed;
- the investment universe and products covered;
- whether the restriction applies to direct and indirect investments;
- the applicable revenue, asset or activity threshold;
- treatment of index, overlay, derivative and pooled-fund exposure;
- implementation timing;
- exceptions and transition arrangements;
- the date on which portfolio holdings were tested; and
- who approved the claim.
Formal policies cannot be used to qualify a clear public representation where the qualification is not communicated prominently to the audience.
15. Recommended controls
| Audience | Control type | Legal rationale | Risk indicator | Practical control |
|---|---|---|---|---|
| Trustee board | Governance | ss 12DB and 12DF | ESG credentials are central to product positioning | Approve an ESG disclosure governance framework |
| Investment team | Preventative | Claims must reflect actual holdings | Restricted exposure through pooled or index funds | Implement portfolio look-through and exception reporting |
| Responsible investment team | Preventative | Definitions must align with public representations | External ESG taxonomy differs from policy wording | Validate and document classification methodology |
| Product and disclosure | Preventative | PDS and fact sheets are regulated communications | Absolute exclusions with internal thresholds | State thresholds, scope and exceptions prominently |
| Marketing | Preventative | Overall impression determines liability | Language such as “no”, “never”, “out” or “eliminated” | Require substantiation and legal approval |
| Data and operations | Detective | Holdings change continuously | Monthly threshold breaches or stale data | Automate screening and escalation |
| Compliance | Detective | Multiple channels create inconsistent messaging | Website and policy wording differ | Maintain a central ESG claims register |
| Executive communications | Preventative | Interviews may convey regulated representations | CEO or CIO discusses exclusions publicly | Pre-clear key messages and verify portfolio data |
| Incident management | Corrective | Inaccurate statements may remain published | Holding discovered contrary to exclusion | Remove or correct promptly and assess reportability |
| Internal audit | Detective | Policy design may not match operation | Reliance on self-certification | Conduct periodic end-to-end ESG assurance |
16. Recommended next steps
Superannuation trustees and investment managers should:
- inventory all current ESG, ethical and responsible-investment representations;
- reconcile each representation to current direct and indirect holdings;
- identify absolute language and replace it with accurate, qualified wording where necessary;
- test whether external ESG data definitions align with the fund’s published policy;
- review pooled funds, index exposure, overlays and derivatives;
- establish real-time or regular exception monitoring;
- require legal and compliance approval for executive interviews and informal ESG commentary;
- record the evidentiary basis and approval date for each published claim;
- assess whether historical inaccuracies require correction, breach reporting or remediation; and
- report material ESG disclosure gaps and overdue remediation to the board.
17. Orders and remedies
| Order or remedy | Legal basis | Amount or scope |
|---|---|---|
| Aggregate pecuniary penalty | s 12GBB, ASIC Act | $10.5 million |
| Adverse publicity notice | s 12GLB(1)(a), ASIC Act | Email to members and six-month website publication |
| Costs | Court order | LGSS to pay ASIC’s costs |
| Liberty to apply | Court order | Variation of publicity-order mechanics if required |
No injunction or individual officer penalty was imposed in this judgment. The liability and penalty orders were directed to LGSS as trustee.
18. Referenced cases
Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 — civil penalties are directed to deterrence and are not governed by a rigid criminal proportionality model — cited at [73], [78].
Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) (2018) 260 FCR 68 — comparable penalties provide limited guidance because each case turns on its own facts — cited at [97].
Australian Securities and Investments Commission v Vanguard Investments Australia Ltd (No 2) [2024] FCA 1086 — greenwashing penalty comparison discussed at [92]–[98].
Australian Securities and Investments Commission v Mercer Superannuation (Australia) Ltd [2024] FCA 850 — greenwashing penalty comparison discussed at [92]–[98].
Finch v Telstra Super Pty Ltd (2010) 242 CLR 254 — importance of superannuation to members — cited at [108].
19. Broader impact
The judgment establishes a significant Australian enforcement benchmark for greenwashing in superannuation and investment products. It confirms that ESG representations are regulated statements about the characteristics and qualities of a financial service, not aspirational marketing. Trustees and fund managers must ensure that claims about exclusions, divestment or ethical screening accurately reflect actual portfolio holdings, including indirect, pooled, index and overlay exposures.
The decision also broadens the concept of harm in greenwashing cases. Direct financial loss was not required: the Court recognised that misleading ESG claims can deprive members of informed investment choice, confer an unfair reputational advantage and undermine confidence in responsible investment products generally. The $10.5 million penalty and adverse publicity order indicate that repeated statements across websites, policies, PDS materials, reports, emails and executive interviews may generate substantial cumulative exposure.
More broadly, the case raises governance expectations for superannuation trustees and AFS licensees. ESG claims require coordinated controls across investment management, data, product disclosure, marketing, legal, compliance and senior management. Absolute terms such as “no investment”, “eliminated” or “out” should not be used unless they are fully supportable, and any thresholds, exceptions or implementation delays should be stated clearly and verified against current holdings before publication.
This analysis is suitable for internal legal, governance and compliance review, but final positions should be confirmed against the liability and declarations judgments, current legislation and any subsequent appellate developments.