Active Super found guilty of greenwashing
Active Super has been found guilty of misleading the public with false claims about its environmental, social, and governance (ESG) credentials.
The profit-to-member fund, which is set to merge with Vision Super in March 2025, made claims on its website and social media, and through public statements - including from former chief executive Phil Stockwell - that it eliminated investments that posed a risk to the environment and the community, including gambling, coal mining, and oil tar sands.
Court documents showed that Active Super said it wouldn't invest in companies deriving more than 10% of their revenue from gambling. Conflictingly, in its Impact Report, which is meant to show how the super fund's investments make a difference, it said gambling investments were off-limits.
However, ASIC found that contrary to Active Super's claims; its trustee, LGSS, had been directly invested in Pointsbet and lottery operator Jumbo Interactive, and indirectly invested in seven gambling companies through a Colonial First State fund and the S&P/ASX 200.
LGSS argued that "no reasonable person" would see the gambling restriction apply to companies that sold lottery tickets because they'd only associate "gambling related social ills" with poker machines, casinos, and online sports betting agencies.
In Federal Court, Justice O'Callaghan disagreed, saying that an average person would consider running lotteries to be gambling as a "matter of ordinary English." He referenced the Macquarie Dictionary, which defines gambling as risking money on an outcome involving chance.
O'Callaghan also rejected Active Super's claims that an ordinary or reasonable consumer would draw a distinction between holding shares in a company and indirect exposures through a pooled fund.
"It seems to me that such a consumer would not draw that distinction..." he said.
"... there is nothing in the Impact Reports or on the LGSS website that suggests that the claims that there was, for example, 'No way' Active Super would invest members funds in gambling, tobacco and so on, was to be read subject to a proviso that there was a way in which it would do exactly that, by investing indirectly, not directly."
O'Callaghan also addressed LGSS' claims about not investing in Russia.
On its website and in a report, LGSS says that the fund wouldn't invest in Russia due to the invasion of Ukraine. For example, an Active Super Responsible Investment report highlighted 'RUSSIA OUT' as a country exclusion. That report revealed that Active Super held investments in Russian stocks through two emerging market funds but begun divesting those securities after the invasion.
But ASIC argued that LGSS held nine investments in Russian companies, including Rosneft Oil, Etalon Group, Mail.ru, Transneft PJSC, Yandex NV, Sberbank of Russia and three investments in Gazprom PJSC, through the Macquarie and Wellington Funds.
LGSS admitted it held these investments but argued that their statements about not investing in Russia referred to future investment decisions and processes it had started. The trustee also claimed that since these investments were through a pooled fund, it didn't count as an investment in Russian entities.
"I don't accept the submission that the Russia representations were directed towards processes that had begun and commitments as to future investments decisions, because that is not what LGSS said, or anything like it," O'Callaghan said.
"Consumers were told that Russia was 'out', and that 'until recently' Active Super 'had' or 'did have' an exposure to Russian stock, and that 'now' Russia is on the list of countries in which the fund 'will not invest'. Read together, or separately, that amounts to an assertion that the fund no longer had any exposure to Russian stocks."
Additionally, Active Super's other investments that contradicted its claims included gambling companies like Skycity Entertainment Group, Aristocrat Leisure, The Lottery Corporation, Tabcorp Holdings, Crown Resorts, and The Star Entertainment Group.
It also invested in tobacco companies such as Amcor PLC, Transcontinental Inc Shs-AVoting Subord, Stora Enso Oyj Clss R, Westrock Co, Smith (DS) PLC.
Moreover, it invested in oil tar sands companies like ConocoPhillips, CK Hutchison Holdings, Shell Plc, TotalEnergies SE, PTT Exploration & Production Public Company Limited, as well as coal mining companies, Coronado Global Resources Inc., New Hope Corporation Limited, and Whitehaven Coal Limited.
Responding the Federal Court judgement, an Active Super spokesperson said the fund has co-operated with ASIC's investigation and supports increased scrutiny on ESG disclosure standards as being good for members, the super industry and the community.
"While a judgement has been made, the court proceeding is still on foot. We take these matters very seriously and are currently considering the judgement and our next steps," the spokesperson said.
This article first appeared on Financial Standard
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