Greenwashing on Trial

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I Introduction

 Australia has recently become a ‘litigation laboratory’, with the Australian Securities and Investments Commission (‘ASIC’) initiating proceedings against major pension funds and investment managers for exaggerated environmental commitments.[i] Greenwashing refers to false or misleading environmental or sustainability claims.[ii] Once confined to marketing language, such claims are recognised as serious violations t[iii]hat erode market confidence and misrepresent material information relied upon by stakeholders.[iv] With the Senate Standing Committee on Environment and Communications expected to deliver its report in June 2026, the ‘green’ label now carries significant legal and financial consequences.[v]

 II The Regulatory Surge: Strengthening Marketing

Heightened scrutiny from ASIC and the Australian Competition and Consumer Commission (‘ACCC’) reflects shifting investment and consumer demand. As of 25 June 2025, Australia’s superannuation sector managed approximately $4.3 trillion in assets, with growing demand for Environmental, Social and Governance (‘ESG’) focused investment options.[vi] Around 78 per cent of Australian consumers consider environmental factors in purchasing decisions.[vii] This demand has incentivised exaggerated ESG claims, distorting competition and undermining market integrity.[viii]

 ASIC and the ACCC have distinct but overlapping jurisdictions. The ACCC regulates consumer-facing goods and services, and following an industry sweep in 2022, found 57 per cent of businesses raised concerns about unsubstantiated environmental claims.[ix] By contrast, ASIC regulates the financial sector and received $4.3 million in 2023 to strengthen greenwashing enforcement and safeguard the integrity of sustainable finance markets.[x] Both regulators increasingly pursue active enforcement strategies through infringement notices, undertakings and civil penalty proceedings for misleading or deceptive conduct.[xi]

III The ‘Big Three’ Landmark Cases

 Enforcement actions against Mercer Super, Vanguard and Active Super illustrate a tightening regulatory stance towards the mischaracterisation of ESG credentials and failures to substantiate sustainability claims.[xii] Each entity received significant monetary penalties and were ordered to post adverse publicity notices for 6–12 months.[xiii]

 In the 2024 ASIC v Mercer Superannuation case (‘Mercer’), the Federal Court approved ASIC’s first civil penalty of $11.3 million for greenwashing, following admissions of misleading representations regarding its “Sustainable Plus” options.[xiv] The fund claimed to exclude sectors such as carbon-intensive fossil fuels, gambling and alcohol, despite six of the seven options holding investments in those industries.[xv]

 Following Mercer, Vanguard was penalised a record $12.9 million in September 2024.[xvi] Vanguard represented that its ethically labelled bond fund applied ESG screening criteria excluding fossil fuel issuers.[xvii] In 2025, the Court imposed a $10.5 million penalty on Active Super for misleading members by claiming it excluded sectors such as gambling, coal mining, and Russian entities while continuing to maintain exposure.[xviii] The Court rejected Vanguard’s reliance on third-party index providers, holding that liability rested with the issuer.[xix]

 Unlike Mercer and Vanguard, which largely conceded to their shortcomings, Active Super contested ASIC’s allegations.[xx] In 2025, the Court imposed a $10.5 million penalty on Active Super for misleading members by claiming it excluded sectors such as gambling, coal mining and Russian entities, while continuing to maintain exposure to them.[xxi] The Court rejected arguments that ‘indirect’ exposure through pooled funds did not constitute investment, holding that ordinary consumers would not draw such technical distinctions.[xxii] Collectively, these landmark decisions confirm that ESG exclusion commitments must be applied consistently and disclosed with clarity and accuracy. 

IV From Marketing to Governance

 Greenwashing enforcement reflects a shift in board and practitioner approaches to sustainability. ASIC’s current approach encompasses both misleading public statements and the underlying governance and compliance systems producing them.[xxiii] Courts have emphasised that greenwashing often arises from inadequate controls, weak oversight, and poor verification processes, elevating it to a core governance risk.[xxiv]

 Regulators are actively relying on existing directors’ duties, particularly the duty of care and diligence under s 180 of the Corporations Act 2001 (Cth) (‘Corporations Act’), in assessing board-level responsibility.[xxv] Boards that endorse ESG targets or ‘ethical’ investment products without ensuring systems to substantiate and monitor those claims expose both the corporation and its directors to liability.[xxvi] Sustainability claims must now be substantiated by robust internal verification.[xxvii]

V Mandatory Sustainability Reporting

 From 2025, Australia introduced mandatory climate-related reporting. Under Chapter 2M of the Corporations Act, large entities and asset owners must provide an annual sustainability report detailing climate-related governance, strategy and risk-management.[xxviii] These disclosures must align with Australian Accounting Standards Board standards based on international benchmarks.[xxix]

 The new regime increases disclosure obligations and regulatory oversight, while permitting limited transitional relief and continued ASIC enforcement for serious misconduct.[xxx] Climate risk is treated as a material financial risk with the same rigour as financial reporting.[xxxi] Although heightened scrutiny has contributed to instances of “greenhushing”, mandatory disclosures render silence unviable, as they require transparent, governance-based disclosure.[xxxii] Looking forward, regulatory inspection may expand to nature and biodiversity reporting, with the 2026 Senate Inquiry into Greenwashing likely to drive further reform.[xxxiii]

 VI Conclusion

Recent enforcement actions demonstrate that governance failures are not a defence.[xxxiv] Emerging jurisprudence emphasises consistency, substantiation, and accurate implementation of ESG claims.[xxxv] Ultimately, greenwashing has evolved from a primarily reputational concern to a material financial and legal risk, requiring ESG disclosures to meet the same level of precision of financial reporting.[xxxvi]

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References

[i] Elena Vance, ‘The Greenwashing Trap: A Comparative Analysis of Corporate Climate Liability and the "Anti-ESG" Backlash in the EU, US, and Australia’ (2024) 16(3) Institute for Global Sustainability Law 1, 2.

[ii] Michelle Brooks et al, ‘A rapidly moving beast: Australian regulatory reforms to tackle ‘greenwashing’ and the lessons we are learning’ (2026) 44(1) 95, 97.

 [iv] Australian Securities and Investments Commission, ‘How to Avoid Greenwashing When Offering or Promoting Sustainability-Related Products’ (Information Sheet 271, March 2026) < https://www.asic.gov.au/regulatory-resources/financial-services/how-to-avoid-greenwashing-when-offering-or-promoting-sustainability-related-products/>.

[v] Environment and Communications References Committee, ‘Greenwashing’, Parliament of Australia (Web Page, 31 July 2025) < https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Environment_and_Communications/Greenwashing48P>.

[vi] Rebekkah Markey-Towler, Climate Change Litigation Cases in Context (Edward Elgar Publishing, 2026) 281; Australian Prudential Regulation Authority, ‘Annual superannuation bulletin - 2024-25 highlights’ (Web Page, 2025) <https://www.apra.gov.au/annual-superannuation-bulletin-2024-25-highlights>.

[vii] Madeline Parker, ‘The Limitations of Greenwashing Regulation under Australian Law’, (2023) 39(6) Environmental and Planning Law Journal 480, 481.

[viii] Ian Ramsay and Miranda Webster, ‘Enforcement action by the ACCC and ASIC in response to greenwashing’ (2025) 31 Competition & Consumer Law Journal 254, 255-256.

[ix] Australian Securities and Investments Commission, ‘ACCC 'greenwashing' internet sweep unearths widespread concerning claims’ (Media Release, 2 March 2023) < https://www.accc.gov.au/media-release/accc-greenwashing-internet-sweep-unearths-widespread-concerning-claims>.

[x] Ian Ramsay and Miranda Webster (n 8) 254.

[xi] Ibid 255-256.

[xii] Gary Chau, ‘Lessons from ASIC’s greenwashing enforcement action’ (2026) 24(10) Financial Services Newsletter 164, 164.

[xiii] Ibid.

[xiv] Australian Securities and Investments Commission v Mercer Superannuation (Australia) Limited [2024] FCA 850 (‘Mercer’). 

[xv] Ibid [2].

[xvi] Australian Securities and Investments Commission v Vanguard Investments Australia Ltd (No 2) [2024] FCA 1086 (‘Vanguard’).

[xvii] Ibid [77]-[78]

[xviii] Ibid [45].

[xix] Ibid [81]-[83].

[xx] Australian Securities and Investments Commission v LGSS Pty Ltd (No 3) [2025] FCA 205 (‘Active Super’).

[xxi] Ibid [3].

[xxii] Ibid [131].

[xxiii] Chau (n 12) 164.

[xxiv] Ibid 164-165.

[xxv] Corporations Act 2001 (Cth) s 180 (‘Corporations Act’); Jacqueline Peel, ‘Corporate Climate Litigation in Australasia: (re)Shaping the Private Law – Climate Interface’ (2025) 24(975) 1, 7.

[xxvi] Corporations Act (n 24) s 180; Jacqueline Peel, ‘Corporate Climate Litigation in Australasia:

(re)Shaping the Private Law – Climate Interface’ (2025) The Oxford Handbook of Climate Change and Private Law 24(975) 1, 7; Active Super (n 19) [84].

[xxvii] Australian Securities and Investments Commission (n 4).

[xxviii] Corporations Act (n 24) ch 2M; Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (Cth).

[xxix] Australian Accounting Standards Board, ‘Australian Sustainability Reporting Standard AASB S2: Climate-related Disclosures’ (Cth, 20 September 2024) <https://www.legislation.gov.au/F2024L01472/asmade/text>.

[xxx] Ian Paterson, ‘Sustainability for asset managers: Australian considerations’ (2025) 20(4) Capital Markets Law Journal 1, 19.

[xxxi] Ibid 1.

[xxxii] Vance (n 1) 6.

[xxxiii] Michelle Brooks et al (n 2) 95; Environment and Communications References Committee (n 5).

[xxxiv] Vanguard (n 16) [81]-[83].

[xxxv] Gary Chau (n 12) 165-166.

[xxxvi] Australian Accounting Standards Board (n 28).