Greenwashing remains on ASIC’s radar 7 min read
ASIC has alleged governance failures and misleading conduct against the responsible entity of an ESG-marketed registered managed investment scheme. On 2 October 2025, it commenced civil penalty proceedings against Fiducian Investment Management Services Limited (FIMSL), alleging breaches of responsible entity duties and misleading conduct in relation to the Diversified Social Aspirations Fund (Fund).
This is ASIC's fourth greenwashing civil penalty case, and the first to allege a breach of a trustee's duty to exercise care and diligence. It signals a broader approach by ASIC, linking greenwashing claims to the statutory duties of responsible entities under the Corporations Act 2001 (Cth) and alleging governance and compliance failures.
In this Insight, we outline the allegations and key takeaways for responsible entities and superannuation trustees.
Key takeaways
- Responsible entities and superannuation trustees may be at risk of breaching their duties to act with care and diligence if they fail to monitor and manage an ESG-marketed fund and its underlying investments in the manner represented in the product disclosure statement (PDS).
- Responsible entities and trustees of ESG-marketed funds should consider reviewing their PDSs and their ongoing monitoring and review processes and procedures, in light of ASIC's allegations against FIMSL in these proceedings. In particular, responsible entities and trustees should ensure that they are undertaking those steps ASIC says a responsible entity in FIMSL's circumstances would have taken to comply with its care and diligence duty.
- Responsible entities and trustees should also take note of ASIC's enforcement approach in relation to misleading PDS statements in light of their PDS due diligence and verification procedures, and consider whether updates to those procedures are necessary.
Overview: ASIC's case against FIMSL
ASIC commenced the proceedings in the Supreme Court of New South Wales seeking declarations, pecuniary penalties and adverse publicity orders against FIMSL. ASIC alleges:
- FIMSL, as responsible entity of the Fund, failed to exercise the care and diligence required by section 601FC(1)(b) of the Corporations Act by failing to adequately monitor and manage the Fund, including monitoring and reviewing the investments held in underlying funds; and
- the Fund's product disclosure statement (PDS) contained representations relating to the Fund's investments and the steps and processes which FIMSL would undertake to monitor and manage the Fund that were liable to mislead the public, in contravention of section 12DF of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
ASIC also alleges that FIMSL failed to comply with its compliance plan for the Fund in respect of the handling of investor and adviser complaints relating to the misalignment of the investments in underlying funds with the Fund's ethical objectives.
Unlike the previous three greenwashing civil penalty proceedings commenced by ASIC, all of which were heard in the Federal Court of Australia, ASIC has brought the case against FIMSL in the Supreme Court of New South Wales.
The reason for this appears to be because of the alternative basis for the declaratory relief sought by ASIC. This relief is sought pursuant to section 12GBA of the ASIC Act or pursuant to section 75 of the Supreme Court Act 1970 (NSW) or the court's inherent jurisdiction.
Duty to exercise care and diligence
ASIC alleges that FIMSL's failure to monitor and manage the Fund included:
- failing to monitor and review the alignment of investments made by the investment managers of the underlying funds with the objectives of the Fund;
- failing to review, amend or qualify the PDS so that it was not false, misleading or deceptive;
- failing to identify ESG risks and have adequate controls; and
- failing to comply with its own risk management and compliance procedures.
A similar statutory duty of care and diligence applies to superannuation trustees as applies to responsible entities, which is also enforceable by ASIC as a civil penalty (although the superannuation trustee duty is of care, 'skill' and diligence, with no apparent reason for the difference). Officers of responsible entities and directors of superannuation trustees also have similar statutory obligations.
ASIC says that a responsible entity in FIMSL's circumstances would have taken various steps in order to comply with its duty of care and diligence which FIMSL did not, including:
- reviewing the securities or shareholdings of the underlying funds to check for their alignment with the Fund's ethical investment objectives;
- reviewing the PDS and investment strategies of the underlying funds;
- engaging an ESG expert to review, monitor and, where necessary, amend the PDS and the structure of the Fund, including its underlying funds; and
- recognising that the underlying funds did not align with the Fund's ethical investment objectives, and consequently taking steps to amend the PDS or cause the managers of the underlying funds to change securities or shareholdings to align with those investment objectives.
Misleading conduct: ASIC's continued reliance on section 12DF of the ASIC Act
ASIC alleges that FIMSL, through representations made in the Fund's PDS, contravened section 12DF of the ASIC Act. This section prohibits a person from engaging in conduct 'liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any financial services' (which include financial products).
ASIC alleges that the Fund's PDS, as issued during the relevant period, contained ESG-related statements which represented that the Fund would:
- only make investments in companies considered to be positive for society and the environment;
- avoid making investments in companies that were considered to have activities that were harmful for society or the environment; and
- avoid making investments in companies exposed to certain sectors or categories.
ASIC also claims the PDS contained a representation that FIMSL would regularly monitor the Fund's investments to ensure they complied with its ESG statements, including by monitoring the activities of its investment managers.
Section 12DF of the ASIC Act has been relied upon by ASIC in each of its previous greenwashing civil penalty proceedings, although each of those proceedings concerned disclosures which included those made outside of the PDSs for the relevant products (such as on the relevant fund websites). In these proceedings against FIMSL, ASIC's entire section 12DF claim is in respect of the PDS disclosures.
The misleading or deceptive conduct prohibitions in the ASIC Act (such as sections 12DA and 12DB of the ASIC Act) generally do not apply to PDSs – the ‘defective’ PDS regime in the Corporations Act (enforceable by ASIC as civil penalties and criminal offences) is intended to govern PDS disclosures instead. Section 12DF applies to misleading representations that are liable to mislead the public (which the courts have held requires an 'actual probability that the public would be misled'), with no carve-out for disclosures made in a PDS.
The defective PDS regime that generally applies to PDSs is rather complex and requires any misleading representation to be 'materially adverse from the point of view of a reasonable person considering whether to proceed to acquire the financial product'. There is also a 'reasonable steps' defence which is available if the product issuer took reasonable steps to ensure that the PDS would not be defective and did not know that the PDS was defective. PDS issuers may have assumed that they could rely on this exception for unknowingly making misstatements in a PDS provided they took such reasonable steps.
By bringing proceedings under section 12DF, ASIC may be seeking to circumvent the difficulties in establishing a contravention of the Corporations Act provisions relating to defective PDSs.
ASIC also seeks to rely on section 12BB of the ASIC Act, which deems representations as to future matters to be misleading if the person making them does not have reasonable grounds.
ASIC's reliance on section 12DF, rather than the defective PDS regime, is notable given all of the allegedly misleading representations were contained in PDSs for the Fund. On the basis that the 'reasonable steps' defence is not available for contraventions of section 12DF, product issuers should be aware of this risk and tailor their due diligence measures accordingly, by specifically considering and seeking sign-off from those responsible for the product design and administration that the statements in the PDS are not 'liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any financial services' including the financial product covered by the PDS.
Next steps
In public comments about the case, ASIC Deputy Chair Sarah Court emphasised that the 'bar for governance standards that underpin ESG representations for investment products is high' and that 'ASIC will ensure that entities which we believe may have failed to meet those standards, are held to account'. It is clear that greenwashing remains firmly in ASIC's sights.
Responsible entities and superannuation trustees of ESG-marketed funds should consider reviewing their PDSs and their ongoing monitoring and review processes and procedures, in light of ASIC's allegations against FIMSL in these proceedings. In particular, responsible entities and trustees should carefully consider the steps ASIC says a responsible entity in FIMSL's circumstances would have taken to comply with its care and diligence duty and ensure their due diligence arrangements are aligned with these measures.