ASIC has taken action for greenwashing against Northern Trust Asset Management Australia with the firm paying $29,820 to comply with two infringement notices.
The notices concerned alleged false and misleading statements about the application of a carbon emissions exclusion screen.
Northern Trust is the investment manager of the NT World Green Transition Index fund which claimed to exclude companies that ‘derive 5 per cent or more of their total annual revenues (either reported or estimated) from thermal coal-based power generation’ and have a score of 3 or 4 in the low carbon transition management score quartile.
ASIC was concerned the information in the PDSs was misleading because the Carbon Emissions Exclusion Screen was not properly applied.
At least three companies were not excluded by MSCI despite the fact they failed the low carbon transition management score quartile. This meant there was an error in applying the Carbon Emissions Exclusion Screen.
The affected holdings included:
- DTE Energy
- NiSource; and
- Power Assets Holding
This issue occurred from around 1 December 2022 to 28 July 2023. Northern Trust subsequently disposed of the holdings and implemented enhanced internal controls and oversight of the index and its constituents.
ASIC deputy chair, Sarah Court, said: “ASIC was concerned that investors may have been misled by statements that certain energy companies would be excluded, when they were not. In this case, the exclusions and screenings were outsourced to a third-party company without significant oversight by Northern Trust.
“We want to stress that as the publisher of these statements, it is the company itself who is responsible for them, not the third party applying the exclusions. Effective oversight of third parties is essential to avoid misleading investors.”
Northern Trust paid the infringement notices on 19 December 2023, payment of an infringement notice is not an admission of liability.
A statement from Northern Trust provided to Money Management said: “The NT World Green Transition Index Fund is a passive fund that seeks to track the risk and return characteristics of the MSCI World Custom ESG Climate Series A Index.
“Three holdings were erroneously included within the MSCI Index and therefore within the fund and once identified, the three securities were divested from the fund and the index was updated accordingly.
“The three holdings represent less than $75,000 in the fund, which holds over 1,250 securities with assets under management of $63 million. At no point was any one holding in the three companies greater than five one-hundredths of 1 percent (0.05%) of the fund’s net asset value.”
ASIC currently has three greenwashing civil penalty cases before the Federal Court against Mercer Super, Vanguard Investments Australia and Active Super. It has also issued infringement notices to Vanguard Investments Australia, Diversa Trustees and Future Super Investment Services.
It has also stated greenwashing will remain one of its enforcement priorities in 2024.
