But ASIC alleges that members who took up the Sustainable Plus options had investments in industries the website statements said were excluded. This included investments in 15 companies involved in the extraction or sale of carbon intensive fossil fuels,such as AGL Energy,mining giant BHP and Whitehaven Coal.

Mercer also stated that the Sustainable Plus options excluded investments in companies involved in alcohol production and gambling. However,ASIC alleged it found investments in 15 companies involved in the production of alcohol and 19 companies involved in gambling.

ASIC said these statements and investments amounted to Mercer engaging in conduct that could mislead the public,and that it sought declarations and financial penalties from the court. It is also seeking injunctions preventing Mercer from continuing to make the alleged misleading statements on its website,and orders requiring Mercer to publicise any breaches found by the court.

ASIC has issued more than $140,000 in infringement notices for alleged greenwashing,levelled against companies such as Tlou Energy,Vanguard Investments Australia,Diversa Trustees and Black Mountain Energy.

But the regulator’s first court proceeding in this area reflects a sharpened focus on action against greenwashing as outlined in ASIC’s 2023 Enforcement Priorities.

“We’re now ramping up,” deputy chair Sarah Court said. “We have made very clear to the industry what we are concerned about. The importance of these court actions is that,if the court rules in ASIC’s favour,it sends a message not just to Mercer,but to the industry more broadly that if you are going to make these kinds of representation,you need to be very sure that you can implement the exclusions you are promising investors.”

The move comes after the Financial Services Royal Commission gave rise to legislative amendments which enhanced ASIC’s powers to take action regarding a broader range of superannuation trustee conduct.

Mercer is not the only superannuation fund potentially misleading consumers.

Market Forces campaigner Brett Morgan said analysis conducted by his firm in July last year found that eight out of 11 major Australian super fund investment options labelled “sustainable” or “socially responsible” were investing in companies expanding in the fossil fuel sector.

“We looked at the investment options offered by Australia’s biggest super funds,with those labels,and compared their investments to a piece of work we did on the 180 global companies most responsible for fossil fuel expansion,” he said.

Morgan said the court action from ASIC was a positive step,but that he would continue to keep an eye on the super funds.

“Super funds are now required to publish their investment holdings every six months,so we continue to analyse those and will continue to publish analyses of their holdings,” Morgan said. “The court action is a big step-up from ASIC and should send shockwaves through the superannuation industry,and corporate Australia more broadly.”

Executive director of research and compliance at Rainmaker,Alex Dunnin,said the watchdog’s focus on disclosure was a sensible approach.

“ASIC is taking a pure disclosure approach,” he said. “It’s not making any judgement on whether super funds are ESG sustainable,but if funds are going to make a claim,they have to be able to defend it. It’s a very clever strategy because if the regulator tried to define ESG investing,it would be picking an incredibly vague,subjective fight.”

Dunnin added ASIC was taking a hard line on greenwashing and the move was months in the making.

“Taking a fund to court is quite an aggressive move,and they’re putting all super funds on notice,” he said. “We’ve been in conversation with ASIC for 12 to 18 months,and they were clearly holding fire,but now they’re taking greenwashing pretty seriously. Mercer is a highly credentialed ESG leader,so it’s quite an interesting test.”

Court said there was “no end of matters” getting referred to the regulator,and that she anticipated further enforcement action against greenwashing this year.

A Mercer spokeswoman said the company was considering ASIC’s concerns,but that it would be inappropriate to comment further because the matter is before the courts.

“Mercer has co-operated with ASIC throughout its investigation,and will continue to carefully consider ASIC’s concerns with respect to this matter,” she said.

The Business Briefing newsletter delivers major stories,exclusive coverage and expert opinion.Sign up to get it every weekday morning.