Understanding ASIC’s action against Active Super
On 11 August, the Australian Securities and Investments Commission (ASIC) initiated civil penalty proceedings against LGSS Pty Limited (Active Super). The regulatory action alleges misleading conduct and misrepresentations made by Active Super regarding its ethical and responsible investment claims.
What has happened
ASIC alleges that Active Super held 28 holdings from 1 February 2021 to 30 June 2023 that either directly or indirectly exposed members to tobacco manufacturing, oil tar sands, coal mining and gambling securities among others it claimed to avoid.
ASIC also alleges that the fund made representations that it would stop investments in Russian securities following the commencement of the war in Ukraine in February but that the fund continued to have such holdings as at 30 June 2023.
The allegations claim Active Super made misrepresentations on the fund’s website, disclosure documents and on Facebook, Instagram and LinkedIn.
More information can be read on ASIC’s media release here.
Key takeaways
ASIC’s action is a reminder of the intensified scrutiny surrounding greenwashing. With the release of ASIC’s Information Sheet 271 in June 2022, there is a clear expectation that investment claims must be substantiated and aligned with the responsible investment strategies of the fund.
Active Super is and continues to be a member of RIAA and has long been an active responsible investor. In RIAA’s most recent Benchmark Report published in 2022, covering data up to 31 December 2021, Active Super was identified as a Responsible Investment Leader. In assessing investment managers as Responsible Investment Leaders, RIAA does not examine specific products or investment options. Active Super was found, at an organisational level, to have strong commitments to responsible investment, and were able to back these up with strong governance, reporting, and processes for implementation across their approach to ESG integration, manager selection and monitoring, and stewardship. For more information on the methodology of our RI leaders assessment, click here.
Active Super has also had certified products with RIAA until recently. These were last assessed in December 2020, and are currently not certified by RIAA.
The industry is evolving as global standards continue to rise (EU SFDR, UK SDR) alongside increasing clarification of regulator expectations in markets around the world in order to protect consumers from misleading practices. Strong consumer demand and financial flows will continue to influence the entry of new ESG funds into the market and it is essential that these are meeting these elevated standards.
Next steps
It is important to continue to uphold transparency and integrity in your own investment practices. Ensure that claims made about your responsible investment products are substantiated and aligned with your strategies.
RIAA continues to reflect these evolving and lifting standards within our work, through our Certification Program as well as encapsulated within our research program, to ensure we are tracking and driving a higher standard of practice in responsible investment consistent with global evolution and consumer expectations.
RIAA’s Certification Program offers strong verification for regulatory compliance. We were pleased to have seen a recent reference by Joe Longo, ASIC Chair, in his speech at the Australian Financial Review Summit in Sydney that some fund managers had called out RIAA as supporting them in meeting regulatory requirements. Learn more about our Certification Program: https://responsibleinvestment.org/ri-certification/product-certification/
RIAA’s soon to be released Responsible Investment Benchmark Report will also be articulating these evolving standards in the way asset managers are assessed this year, with a rising expectation of evidence to meet our RI Leaders category this year.
RI Benchmark Report 2023 Australia launch: https://riaa.glueup.com/event/ri-benchmark-report-2023-australia-80894
RI Benchmark Report 2023 Aotearoa New Zealand launch: https://riaa.glueup.com/event/ri-benchmark-report-2023-aotearoa-nz-81055
In short, the market needs to be constantly working on improving practices to ensure alignment with rising global standards and the expectations of regulators and consumers. What was considered responsible investment leadership three years ago is different to what is considered leadership today. RIAA is proud to be part of driving up standards of responsible investment and supporting our members to improve their responsible investment practices.