CORPORATIONS — Australian Securities and Investments Commission — civil penalty proceeding — where the Defendant operated a managed investment fund that was promoted as focussed on environmental, social and governance (ESG) objectives — where the underlying investments of the fund included investments in companies with substantial revenue from fossil fuels — where senior management were aware of issues being raised regarding misalignment between the investment objectives and the underlying investments — the Defendant admitted making misleading statements about the fund and failing to exercise care and diligence in relation to the fund — the parties prepared a statement of agreed facts and jointly proposed declarations of contravention and a pecuniary penalty — whether declaratory relief should be granted — whether proposed pecuniary penalty is an appropriate penalty
Quick Take
1A responsible entity operating an ESG-branded managed investment scheme that fails to monitor underlying investments for alignment with the fund's stated ethical investment objectives, and fails to review or amend its PDS to reflect actual investment holdings, contravenes both the prohibition on misleading conduct as to financial services (s 12DF ASIC Act) and the duty of care and diligence (s 601FC(1)(b) Corporations Act), even where the conduct is negligent rather than deliberate.
2Where multiple contraventions of s 12DF arise from successive versions of a PDS containing relevantly identical misleading representations over a single contravention period, they may properly be treated as a single course of conduct for penalty purposes, with the totality principle applied as a final check on proportionality.
3The absence of direct financial loss to investors does not preclude a substantial penalty where the greenwashing conduct denied investors the opportunity to make informed choices and eroded confidence in the financial system and in ESG-related product representations.
