Financial greenwashing enforcement
Actions by regulators and courts against misleading sustainability claims on financial or insurance products, turning a marketing promise into a legal risk.
A sustainability claim on a fund, a savings product or a policy is a statement of fact: if the portfolio holds what the brochure says it excludes, the saver has been misled, however sincere the intent. Regulators have grasped this and now pursue such gaps under general misleading conduct law, without waiting for a dedicated statute: all it takes is comparing the promise with the portfolio's actual holdings. For an insurer, the exposure is twofold: as a distributor of unit-linked products or an asset manager, it can be prosecuted; as a directors and officers liability insurer, it may have to fund the defense of a client under prosecution. The evidence rests on portfolio holdings, which leave little room for interpretation.
On August 2, 2024, in the first greenwashing case brought by the Australian regulator ASIC before the Federal Court, Mercer Superannuation was ordered to pay an A$11.3 million penalty: its "Sustainable Plus" options, marketed between November 2021 and March 2023 as excluding fossil fuels and alcohol, held among others fifteen fossil fuel companies and fifteen alcohol companies.
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