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UniSuper’s sustainable option raises greenwashing concerns

A member of the $135 billion UniSuper fund has approached ASIC to investigate potentially misleading or deceptive representations by the fund regarding holdings in its sustainable portfolios.

user iconRhea Nath 26 April 2024 Corporate Counsel
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Editor’s note: This story first appeared on Lawyers Weekly’s sister brand, Investor Daily.

The holdings of UniSuper’s Sustainable Balanced and Sustainable High Growth funds could soon come under scrutiny from the corporate regulator amid claims that they are “inconsistent” with their sustainable representations.

Fund member Christopher Standen, through the Environmental Defenders Office (EDO), has lodged a complaint with the Australian Securities and Investments Commission (ASIC) over UniSuper’s investment in toll road operator Transurban Group.


He alleges urban road expansion has direct and indirect environmental, social and health impacts, contrary to the sustainable representations made by the fund.

In a letter to ASIC, the EDO outlined these impacts “include significantly contributing to global greenhouse emissions from the construction of roads, and from the growing number of vehicles that travel on these roads”.

“Transurban Group’s business model relies on increasing road traffic, which increases climate and other pollution,” Standen said.

“Road transport causes about 20 per cent of Australia’s total greenhouse gas emissions. While other sectors, such as electricity generation, are reducing their emissions in line with Australia’s net zero target, road transport emissions continue to increase – fuelled largely by continued urban motorway expansion.”

He added that toll roads are “clearly not environmentally sustainable”, meaning the super fund “should not market products as sustainable when they include those sorts of investments”.

“I’m concerned that UniSuper members may take the sustainability claims of the company at face value and not look more closely at how the financial returns from those products are being generated,” Standen said.

“Members who chose investment options marketed as sustainable would be appalled to know that toll road profits were contributing to their earnings.”

As at 31 December 2023, the holdings of Transurban Group shares form around 1.7 per cent of the Sustainable Balanced investment option by weight and 1.3 per cent of the Sustainable High Growth option.

The letter to ASIC comes on the back of Standen’s prior complaint to UniSuper in January 2024, where he first expressed concerns about the fund’s investment in Transurban.

In its response to this initial complaint, UniSuper said it recognised that “sustainable and environmental investing mean different things to different people” and said that its sustainable branded options exclude companies whose reported revenues from certain industries exceed the materiality thresholds it set.

“Transurban is eligible for inclusion in the sustainable branded options based on the company’s considered approach to environmental, social and governance (ESG) issues (e.g., climate change and road safety) and strong business standards and practices,” UniSuper’s response outlined.

“It also meets the sustainable branded options’ screening criteria. In addition, we have assessed the company’s approach to emissions reduction, which includes an interim target of a 50 per cent reduction in emissions by 2030 (achieved in financial year 2023) and net zero emissions by 2050.

“We are comfortable based on the above that Transurban is eligible for inclusion in these options.”

Moreover, it said these options are certified by the Responsible Investment Association Australasia (RIAA).

However, Standen has deemed UniSuper’s response “unsatisfactory”, according to the EDO, and he is now requesting ASIC investigate whether UniSuper’s conduct may amount to misleading or deceptive, or conduct that is likely to mislead or deceive, in contravention of the Australian Securities and Investments Commission Act 2001 and/or the Corporations Act 2001.

Super Review reached out to UniSuper for comment; however, the fund was unable to provide a response by the time of publication.

Greenwashing comes to the forefront

EDO managing lawyer Kirsty Ruddock noted that greenwashing claims have received increased regulatory attention in recent years even as sustainability claims have become “so ubiquitous and profitable”.

Knowing that investors are keen to minimise the environmental impact of their spending, many companies have been designing their marketing strategies accordingly, she said.

“Too often, the claims made in marketing materials are not matched by the products and services on offer. While UniSuper did disclose the investments in Transurban Group, that information was not easily accessible,” she said.

“ASIC has said headline claims about sustainability should not require exceptions and qualifications to rectify an otherwise misleading impression. That means not referring investors to another webpage or prospectus to find out information to correct a misleading or deceptive impression.”

In contrast, the EDO noted that another super fund, Australian Ethical, excluded Transurban from its investment portfolio in 2022, citing “inadequate governance to safeguard the development of high-impact infrastructure in the public interest”.

It is understood this marks the second time that UniSuper has faced a greenwashing complaint from a fund member. In April 2022, member Rachel Davies alleged UniSuper’s investments in gas giant Santos “may amount to a breach of the law”. 

The $135 billion fund subsequently sold off most of its Santos shares, and the complaint was not referred to an external review body.

Last month, ASIC saw its first greenwashing court victory after the Federal Court found Vanguard Investments Australia contravened the law by making misleading claims about certain environmental, social and governance (ESG) exclusionary screens applied to investments in a Vanguard index fund.

The matter has been listed for further hearing on 1 August 2024, at which the court will consider the appropriate penalty to impose for the conduct.

Previously, Mercer Super was handed down a $11 million penalty under a proposed settlement with ASIC over allegedly misleading statements to members on the sustainability of its investments.

Proceedings are also underway over allegedly misleading sustainability claims by Active Super.