1. Executive summary
In Australian Securities and Investments Commission v Mercer Superannuation (Australia) Limited [2024] FCA 850, Horan J imposed a $11.3 million pecuniary penalty on Mercer for greenwashing representations concerning seven “Sustainable Plus” investment options offered through the Mercer Super Trust.
Between 12 November 2021 and 1 March 2023, Mercer represented through a promotional video and website statements that the Sustainable Plus options excluded, and would continue to exclude, investments in companies involved in or deriving profit from:
- alcohol production or sale;
- gambling; and
- the extraction or sale of carbon-intensive fossil fuels.
Those statements were false or misleading. Six of the seven options held investments connected with one or more of those sectors, while Mercer’s investment policies permitted relevant exposures through parts of the portfolios that were not subject to its additional sustainability exclusions.
The Court declared that Mercer contravened:
- s 12DB(1)(a) of the Australian Securities and Investments Commission Act 2001 (Cth), by making false or misleading representations about the standard, quality, value or grade of financial services; and
- s 12DF(1) of the ASIC Act, by engaging in conduct liable to mislead the public about the nature and characteristics of financial services.
The Court also ordered Mercer to publish an adverse publicity notice prominently on its sustainable investment webpage for six months and to pay ASIC’s costs.
The decision is significant because it confirms that:
- ESG exclusions must be assessed against the complete portfolio, including managed funds and asset classes not directly controlled by the trustee;
- absolute claims such as “will not invest” are misleading if any inconsistent exposure exists;
- a disclaimer referring consumers to formal disclosure documents will not necessarily correct an unequivocal headline representation;
- greenwashing harm includes the loss of informed investment choice, reputational advantage and competitive benefit, even where individual financial loss cannot be quantified;
- data availability does not constitute an effective control unless it is connected to a formal review, approval and escalation process;
- senior-management awareness and an incomplete response to identified discrepancies materially increase regulatory exposure; and
- ESG marketing governance must operate across investment management, product disclosure, legal, compliance and communications functions.
2. Citation and context
Case: Australian Securities and Investments Commission v Mercer Superannuation (Australia) Limited
Neutral citation: [2024] FCA 850
Court: Federal Court of Australia
Judge: Horan J
Judgment and orders: 2 August 2024
Hearing date: 7 December 2023
Proceeding: VID 117 of 2023
Registry: Victoria
Nature of decision: Agreed declarations, civil penalty, adverse publicity and costs orders concerning greenwashing representations.
ASIC and Mercer resolved the proceeding through agreed facts and jointly proposed declarations, penalties and an adverse publicity order. The Court independently assessed the proposed outcome and concluded that it was appropriate.
3. The Sustainable Plus options
Mercer offered seven Sustainable Plus investment options through the Mercer Super Trust. The options were promoted as going further than Mercer’s other investment options in their commitment to sustainable investment.
A video published on Mercer’s website, Vimeo and YouTube stated that the Sustainable Plus options:
“will not invest in alcohol, gambling and carbon intensive fossil fuels like thermal coal”: at [24].
Website statements similarly represented that the options excluded companies involved in alcohol production, gambling and carbon-intensive fossil fuels. Some statements added that the precise exclusions varied between options, but the core representation remained that the nominated sectors were excluded.
The representations were made during four overlapping publication periods between November 2021 and March 2023 through:
- a promotional video;
- a webpage describing Mercer Super Trust investment options;
- a sustainable investing webpage; and
- a sustainable and ethical super webpage.
4. Actual portfolio exposure
Six of the seven Sustainable Plus options held investments in companies involved in or deriving profit from one or more of the represented excluded industries.
The declared findings included:
| Sustainable Plus option | Carbon-intensive fossil fuels | Alcohol | Gambling |
|---|---|---|---|
| Australian Shares | 2 companies | — | — |
| Shares | 2 companies | — | — |
| High Growth | Up to 15 companies | Up to 15 companies | Up to 19 companies |
| Growth | Up to 13 companies | Up to 14 companies | Up to 14 companies |
| Moderate Growth | Up to 15 companies | Up to 15 companies | Up to 18 companies |
| Conservative Growth | Up to 13 companies | Up to 14 companies | Up to 14 companies |
The combined exposure to represented excluded industries was approximately $8 million as at 1 March 2023, compared with approximately $174 million in total assets across the Sustainable Plus options.
The amount of exposure varied substantially. Some holdings were very small, while other exposures were more significant. That distinction did not avoid liability because Mercer’s public claims were absolute and unqualified. Any inconsistent exposure was sufficient to make the representation misleading.
5. How the mismatch occurred
Mercer applied additional sustainability exclusions to some asset classes. However, the diversified Sustainable Plus options also invested through managed investment schemes and asset classes to which those exclusions did not apply.
Mercer therefore did not ensure that every part of the options’ portfolios excluded companies involved in alcohol, gambling or carbon-intensive fossil fuels. Its investment policies continued to permit relevant exposure while its marketing stated that the options excluded those sectors.
The mismatch reflected a failure to align:
- the public meaning of the ESG claim;
- internal investment-policy definitions;
- revenue and materiality thresholds;
- the coverage of exclusion screens;
- managed-fund and indirect exposures;
- temporary exceptions; and
- the actual holdings within each option.
6. Contraventions and findings
| Act | Provision | Prohibition | Conduct | Finding |
|---|---|---|---|---|
| ASIC Act 2001 (Cth) | s 12DB(1)(a) | False or misleading representations that financial services have a particular standard, quality, value or grade | Mercer represented that the Sustainable Plus options excluded, and would continue to exclude, companies associated with alcohol, gambling and carbon-intensive fossil fuels | Contraventions established |
| ASIC Act 2001 (Cth) | s 12DF(1) | Conduct liable to mislead the public as to the nature or characteristics of financial services | Mercer promoted the options as applying exclusions that did not operate across all relevant portfolio exposures | Contravention established |
The representations were misleading as to both:
- the existing characteristics of the options; and
- their future or continuing characteristics.
Mercer lacked reasonable grounds for the future-facing claims because its own policies permitted the options to invest in the represented excluded sectors.
7. Key legal and compliance principles
Absolute ESG representations require complete support
Mercer’s statements did not say that the options sought to reduce exposure, generally avoided particular industries or applied exclusions subject to specified limits. They stated that the options excluded, and would not invest in, the nominated industries.
The Court regarded those statements as absolute and unqualified. Consequently, even relatively small holdings could render the claim misleading.
The compliance lesson is that terms such as:
- “exclude”;
- “will not invest”;
- “fossil-fuel free”;
- “no exposure”; and
- “avoids gambling or alcohol”
should be used only where the organisation can demonstrate that the representation is accurate across the entire product and remains accurate over time.
Portfolio size does not cure a false exclusion claim
Mercer’s exposure to excluded sectors represented a relatively small proportion of total assets in the Sustainable Plus options. That did not prevent contravention.
A representation of no exposure is not converted into an accurate statement merely because the inconsistent investment is immaterial from a portfolio-performance perspective. Materiality thresholds used internally must be disclosed if they qualify the ordinary meaning of the public claim.
Indirect and pooled holdings remain relevant
The case demonstrates that a product-level ESG representation must take account of all asset classes and investment vehicles within the option.
A trustee cannot assess accuracy solely by reference to:
- directly held equities;
- internally managed portfolios;
- the asset classes to which its own exclusion screen applies; or
- the holdings most visible to the marketing team.
Managed investment schemes, pooled funds and other indirect exposures must be included unless the public representation clearly explains their treatment.
General disclaimers do not neutralise specific claims
A disclaimer on one webpage directed consumers to the PDS, product guide and financial services guide. The unequivocal exclusion statements nevertheless remained false or misleading.
A generic direction to formal disclosure material is unlikely to cure a clear headline claim where the qualification is not prominent, specific and consistent with the overall impression.
ESG data must be connected to controls
Mercer had regular reports available from which it could determine whether the Sustainable Plus options held investments associated with the excluded industries. It nevertheless failed to implement a system ensuring that its public representations were accurate.
The case distinguishes between:
- possessing relevant data; and
- operating an effective disclosure control.
An effective system must specify who reviews the data, which claims are affected, the review frequency, escalation thresholds, approval responsibilities and the action required where holdings conflict with published statements.
8. Governance and senior-management failures
Mercer’s senior management was aware before or during the relevant period that some Sustainable Plus options held investments that derived revenue from thermal coal mining or otherwise breached exclusion requirements.
In July 2022, Mercer was notified that Market Forces intended to publish material alleging that a Sustainable Plus option invested in fossil-fuel companies despite Mercer’s exclusion claims. The issue was escalated to senior management and the chief executive officer.
Mercer removed references to carbon-intensive fossil fuels from one website statement but left other alcohol and gambling representations unchanged. It did not conduct a complete review of all Sustainable Plus options, all excluded industries or all public statements. Broader corrective action occurred only after ASIC commenced the proceeding.
Horan J accepted the parties’ characterisation that the contraventions involved more than carelessness and could be regarded as at least reckless, if not deliberate. The conduct involved officers at senior-management level: at [130].
9. Deficient marketing controls
Mercer had marketing and legal-compliance checklists, but there was:
- no formal process mandating their use;
- no monitoring of whether they were completed;
- no adequate approval process for website communications outside formal PDS updates; and
- no review that identified the inconsistency between marketing claims and actual holdings.
The existence of optional checklists did not amount to an effective compliance control.
This is operationally important. A control must be:
- mandatory;
- assigned to an accountable owner;
- evidenced;
- monitored;
- linked to current portfolio data; and
- capable of stopping publication.
10. Consumer and market harm
The parties could not identify individual consumers who invested because of the misleading representations or quantify any resulting investment-performance loss.
That did not make the conduct harmless.
Consumers who relied on the claims were denied the opportunity to make an informed investment choice and to ensure their retirement savings were not invested in companies they intended to avoid.
Mercer also obtained likely commercial benefits by:
- attracting members to the Sustainable Plus options;
- supporting its reputation and credibility as a sustainable investment provider; and
- gaining a competitive advantage over providers whose claims were more accurate or qualified.
During the relevant period, membership in the Sustainable Plus options increased from 1,742 to 2,477 unique members, while assets increased from approximately $153.4 million to $174 million. The judgment did not find that the misleading claims caused all or any specified part of that growth.
11. Penalty assessment
The Court accepted the jointly proposed total penalty of $11.3 million.
The contraventions:
- occurred repeatedly over approximately 16 months;
- involved multiple online statements;
- were used to market financial products to the public;
- concerned matters likely to be important to ESG-focused consumers;
- were known or should have been known at senior-management level;
- continued after external allegations brought the discrepancy to Mercer’s attention; and
- arose in the absence of an effective verification system.
Mercer was a sophisticated and well-resourced financial services provider. The Court accepted that an appropriately substantial penalty was required to achieve specific and general deterrence. Mercer’s admissions and acceptance of responsibility moderated the need for specific deterrence but did not eliminate it.
Applying the totality principle, the Court found that $11.3 million was just, appropriate and not oppressive.
12. Corrective and remedial action
After the proceeding commenced, Mercer:
- removed the remaining misleading statements;
- published a Sustainable Investments Information Booklet;
- explained that the options aimed to reduce exposure but might still hold excluded securities;
- clarified the treatment of indirect exposures and asset classes;
- reviewed its disclosures; and
- accepted responsibility through agreed facts and orders.
The revised language was materially more qualified than the original claims. It acknowledged that exclusion processes did not necessarily prevent all exposure.
The later correction mitigated the penalty but did not erase the earlier contraventions.
13. Adverse publicity order
The Court ordered Mercer to publish a notice on its sustainable-investment webpage for six months.
The notice had to be accessible through a prominent click-through banner stating:
“False and Misleading Statements by Mercer about Sustainable Investing – Notice ordered by the Federal Court of Australia”.
The notice was required to explain the misconduct, identify the contravened provisions and state the penalty.
The Court explained that adverse publicity orders can:
- alert consumers to contravening conduct;
- dispel incorrect impressions;
- support deterrence;
- prevent repetition; and
- impose a punitive consequence.
The Court considered the website notice appropriate because the original representations had been made online and might continue to affect consumers’ understanding of Mercer’s ESG credentials.
14. Orders and remedies
| Order or remedy | Legal basis | Amount or scope |
|---|---|---|
| Declarations | ss 12DB(1)(a) and 12DF(1), ASIC Act | False and misleading ESG representations concerning seven Sustainable Plus options |
| Pecuniary penalty | s 12GBB, ASIC Act | $11.3 million |
| Adverse publicity notice | s 12GLB, ASIC Act | Prominent website publication for six months |
| Costs | Court order | Mercer to pay ASIC’s costs as agreed or assessed |
No individual officer penalty or member compensation order was imposed in this judgment.
15. Broader significance
The decision was an important early Australian civil penalty benchmark for greenwashing by a superannuation trustee.
It establishes that ESG claims are regulated product representations, not merely corporate values statements. A trustee must be able to demonstrate that the public meaning of a claim matches:
- the formal investment policy;
- the screening methodology;
- actual holdings;
- indirect exposures;
- exceptions and temporary approvals;
- relevant revenue thresholds; and
- the systems used to monitor continuing accuracy.
The judgment also shows that reputational and investor-choice harm may support a significant penalty even where ASIC cannot prove direct monetary loss to individual members.
16. Relevance for trustees, fund managers and AFS licensees
Financial services businesses should treat every ESG claim as requiring a documented evidentiary basis.
Particular risk arises where:
- the public statement is absolute but the investment process is qualified;
- exclusions apply only to selected asset classes;
- pooled funds remain capable of holding excluded companies;
- threshold-based screens are described as complete exclusions;
- temporary exceptions are not disclosed;
- marketing teams rely on product names rather than holdings data;
- multiple webpages use inconsistent language; or
- concerns are addressed only in the specific channel where an external party identified them.
Formal disclosure documents, promotional videos, webpages, social media, executive interviews and member communications should be subject to the same verification standard.
17. Recommended controls
| Audience | Control type | Legal rationale | Risk indicator | Practical control |
|---|---|---|---|---|
| Trustee board | Governance | ss 12DB and 12DF | Sustainability is central to product positioning | Approve an ESG claims and disclosure framework |
| Investment team | Preventative | Claims must reflect complete portfolio exposure | Exclusions apply only to some asset classes | Map every option and underlying vehicle against each exclusion |
| Responsible investment team | Preventative | Public meaning may differ from internal methodology | Revenue thresholds or temporary exceptions | Maintain a documented claims dictionary |
| Product disclosure | Preventative | Current and future claims require reasonable grounds | “Will not invest” language | Use qualified wording supported by policy and data |
| Marketing | Preventative | Overall impression determines liability | Absolute ESG language | Require substantiation and compliance approval before publication |
| Compliance | Detective | Data must inform communications | Holdings reports not linked to claims | Maintain a central ESG claims register and review calendar |
| Data and operations | Detective | Portfolio composition changes continuously | New excluded holding or threshold breach | Automate exception monitoring and escalation |
| Executive management | Governance | Senior knowledge increases seriousness | External criticism identifies possible mismatch | Conduct enterprise-wide review, not a single-page correction |
| Internal audit | Detective | Optional checklists are ineffective | No evidence of approval | Test mandatory completion and control operation |
| Incident management | Corrective | Misleading material may remain accessible | Claim identified as inaccurate | Remove, correct and assess reportability promptly |
18. Recommended next steps
Superannuation trustees and investment managers should:
- inventory every current ESG and ethical-investment statement;
- identify the meaning an ordinary consumer would take from each claim;
- reconcile each statement against direct and indirect portfolio holdings;
- document exclusions, thresholds, exceptions and implementation timing;
- review whether managed funds and pooled vehicles are covered by the claim;
- replace unsupported absolute language with accurate qualified wording;
- make ESG approval checklists mandatory and auditable;
- establish recurring holdings-to-claims monitoring;
- escalate external allegations across all products, sectors and communication channels; and
- assess whether historical misstatements require correction, breach reporting or member communication.
19. Referenced cases
Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 — deterrence as the central purpose of civil penalties.
Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 — Court’s role in assessing agreed civil penalties.
Australian Securities and Investments Commission v Vanguard Investments Australia Ltd [2024] FCA 308 — misleading ESG representations and agreed penalty process.
Australian Securities and Investments Commission v LGSS Pty Ltd [2024] FCA 587 — greenwashing representations by a superannuation trustee.
20. Broader impact
The judgment sets an important Australian enforcement benchmark for greenwashing by confirming that ESG claims are regulated representations about financial products, not aspirational marketing. Trustees, fund managers and AFS licensees must ensure that claims such as “will not invest”, “excludes” or “fossil-fuel free” accurately reflect the complete portfolio, including indirect, pooled and externally managed exposures.
The decision also shows that direct financial loss is not required for serious regulatory consequences. Misleading sustainability claims can deprive consumers of informed investment choice, confer an unfair commercial and reputational advantage, and undermine confidence in ESG products generally. The $11.3 million penalty and six-month adverse publicity order demonstrate that those forms of harm can justify substantial sanctions.
More broadly, the case raises governance expectations across investment, product, marketing, legal, compliance and senior management functions. ESG data must be connected to mandatory review, approval, monitoring and escalation controls, and a general disclaimer will not cure an unequivocal headline claim. Firms should review all sustainability statements against current holdings and clearly disclose thresholds, exceptions and limitations.
This analysis is suitable for internal legal, governance and compliance review, but final positions should be confirmed against the complete judgment, current legislation and any subsequent appellate or regulatory developments.