An Australian super fund made false statements when it said it would not invest in certain environmentally harmful or unethical corporations, a judge has found.
The Federal Court found on Wednesday that LGSS, now known as Active Super, misled consumers by saying it had eliminated investments that were too great a risk, including in gambling, coal mining and oil tar sands.
It also falsely stated that investments in Russian firms were "out" following the invasion of Ukraine.
Justice David O'Callaghan found that between February 2021 and June 2023, Active Super actually held investments in these types of assets which it claimed were too risky for the environment or community.
The findings are a win for the Australian Securities and Investments Commission which filed the lawsuit in August 2023.
Active Super invested in ConocoPhillips, Shell and other firms which mine oil from tar sands in a process considered environmentally destructive.
The fund also held nine investments in Russian firms despite publicly stating investments from the country would be "left in the cold," the judge found.
It also put money into coal mining giants New Hope Corporation and Whitehaven.
Justice O'Callaghan rejected Active Super's arguments that consumers would distinguish between direct investments and those which were held in pooled funds.
"In my view, that distinction is one which no ordinary reasonable consumer would draw," he wrote.
The fund also held assets in gambling companies such as SportsBet, Aristocrat, Tabcorp, Crown Resorts and The Star Entertainment Group.
Public statements there was "no way" Active Super would invest in gambling business were not just guiding principles, Justice O'Callaghan said.
Claims it merely promised to "do its best" not to invest in gambling were far-fetched, the judge found.
ASIC deputy chair Sarah Court called the judgment a "significant outcome" which showed the regulator's commitment to take action against greenwashing.
"ASIC took this case because it sends a strong message to companies making sustainable investment claims that they need to reflect their true position," she said.
The watchdog suffered a minor loss in one part of its case with Justice O'Callaghan finding that Active Super had not misled consumers about investing in tobacco firms.
The fund had not misrepresented its position even though it put money into firms connected to the tobacco industry, including through transportation, energy or packaging, the judge found.
An Active Super spokesperson said the company had co-operated with ASIC and welcomed the increased scrutiny.
"We take these matters very seriously and are currently considering the judgment and our next steps," she said.
ASIC is also seeking penalties, adverse publicity orders and injunctions which will be considered by the court later.
