Glossary›Measurement and governance / Governance, board and directors›Greenwashing (regulatory meaning under ASIC)
Glossary term
Cluster E · E7
Tier 2
Greenwashing (regulatory meaning under ASIC)
Definition
In the regulatory sense, greenwashing is misrepresenting the extent to which a financial product, practice or entity is environmentally friendly, sustainable or climate-aligned. It is enforced in Australia through the general misleading or deceptive conduct and false representation provisions rather than a dedicated offence, and it carries civil penalties in the millions.
ASIC Act 2001 sections 12DA and 12DB
· Corporations Act 2001 section 1041H, ASIC Regulatory Guide 280 ·
In force
On this page
In practice
The everyday use of “greenwashing” means an environmental claim that feels overstated. The regulatory concept is narrower, harder-edged and considerably more dangerous, and the difference is worth setting out precisely because boards apply the reputational test when the legal test is the one that applies.
There is no offence called greenwashing. ASIC enforces it through the existing misleading and deceptive conduct machinery: sections 12DA and 12DB of the ASIC Act and section 1041H of the Corporations Act. That has three consequences that matter.
Intention is irrelevant. Conduct can be misleading without any intent to mislead. An entity that genuinely believed its claim was true can still contravene.
Omission counts. A statement that is literally true can be misleading because of what it leaves out. “Our operations are carbon neutral” is misleading where operations are a small fraction of the entity’s footprint and the reader would reasonably take the claim more broadly.
The audience standard is the ordinary reader. Not a sophisticated investor, not a technical reviewer. Whether a class of ordinary consumers or investors would be led into error is the question, and qualifying detail in a footnote rarely cures a headline.
The enforcement record is real and the penalties are not nominal. ASIC has secured three civil penalty outcomes in the Federal Court.
Outcome
Penalty
What the claim was
Mercer Superannuation, August 2024
$11.3 million
ASIC’s first greenwashing civil penalty, over claims that “Sustainable Plus” investment options excluded carbon-intensive fossil fuels, alcohol and gambling when they did not.
Vanguard Investments Australia, September 2024
$12.9 million
Misleading claims about ESG exclusionary screens.
LGSS Pty Ltd as trustee for Active Super, March 2025
$10.5 million
False or misleading representations about its green credentials.
Adverse publicity orders accompanied the penalties.
Two features of that record are instructive for a captured private entity, even though all three defendants were financial product issuers.
Every case turned on a specific, checkable claim (what was excluded from a portfolio) rather than on general environmental positioning. The claims failed because the exclusion did not match the stated screen. Vague aspiration was not what was prosecuted; precise assertions that turned out to be wrong were.
And in each case the gap was between what the marketing said and what the underlying process actually did. Nobody fabricated anything. The claims outran the systems behind them, which is exactly the failure mode a first-time climate reporter is most exposed to.
Where the exposure sits for a captured entity, specifically. Not in the sustainability report. The report is prepared to a standard, assured by a practitioner, and for an initial period certain statements in it attract the section 1707D modified liability protection.
The exposure sits in everything else. The website. The tender response. The investor update. The product packaging. The LinkedIn post. The supplier questionnaire. Section 1707D protection does not extend to a protected statement voluntarily repeated outside the report, so the same sentence carries protection in one document and full exposure in another. And ASIC retains its enforcement capability in both places regardless.
That produces a concrete governance instruction, and it is the practical output of this entry. Every public climate claim the entity makes should be traceable to a figure or statement in the assured sustainability report, and someone should own that reconciliation. An entity whose marketing team writes climate copy without reference to the disclosure has built the exact gap every enforcement action has been decided on.
Three claim types that reliably attract attention. Net zero or carbon neutral claims with no substantiation of the underlying credits or reductions. Targets described without the scope, base year or pathway that would let a reader assess them, and note AASB S2 paragraph 33 requires those characteristics in the report, so a target stated with them internally and without them externally is an avoidable inconsistency. And forward-looking statements made without reasonable grounds, which under section 769C are deemed misleading if the maker cannot demonstrate reasonable grounds for them.
What the assurer does with it
Greenwashing is not the assurer’s subject matter and they do not form a conclusion on it. They meet it through the consistency obligation, and it is one of the more uncomfortable interactions in an engagement.
The assurer reads the entity’s other published information alongside the sustainability report and considers whether it is materially inconsistent with the disclosures or with the knowledge they obtained during the engagement. A website claim that the report does not support is an inconsistency they must raise with management and, where unresolved, with those charged with governance.
What they typically request is the entity’s climate claims inventory: every public statement about climate, emissions, targets or environmental performance, and its source. Most entities have never compiled one and the compilation exercise itself finds the problems.
They accept public claims that reconcile to disclosed figures with the same scope and boundary. They reject a claim covering a broader boundary than the disclosure supports, a claim using a figure net of offsets where the disclosure is gross, a target stated externally without the characteristics disclosed internally, and a certification claim that has lapsed.
Commonly confused with
The reputational sense of the word, which is a communications judgement about tone. The regulatory concept is about whether an ordinary reader would be misled by a specific representation, and a claim can be reputationally unremarkable and legally actionable. Also confused with greenhushing, which is the opposite behaviour and carries a different set of risks.
Timing and relief
The section 1707D modified liability settings provide transitional protection for certain statements in the sustainability report and the report on it, and the protection is narrower for forward-looking climate statements than for other protected statements. The protection applies to statements in the report and does not travel with them into other documents. Confirm the scope and the end date for the entity’s own financial year against ASIC Regulatory Guide 280, because the periods are defined by reference to reporting periods rather than calendar dates.
Sources
1
Australian Securities and Investments Commission Act 2001 (Cth)
Federal Register of Legislation
2
3
4
How to avoid greenwashing when offering or promoting sustainability-related products
ASIC
5
24-173MR ASIC’s first greenwashing case results in landmark $11.3 million penalty for Mercer
ASIC
6
24-213MR ASIC’s Vanguard greenwashing action results in record $12.9 million penalty
ASIC
7
25-042MR Active Super ordered to pay $10.5 million penalty in ASIC’s third greenwashing court action
ASIC
Review status
Review required
Last reviewed
15 September 2026
Editorial pass, unsigned
Reviewer required
Corporate lawyer or registered company auditor
Next scheduled review
1 July 2027
Part of
Cluster E, Measurement and governance / Governance, board and directors
10 terms on what the board must be able to evidence, what personal exposure directors carry, and how the audit and risk committee engages with the assurer. Governance disclosures sit inside the year-one assurance scope.
Related terms
The opposite behaviour, and why silence is not safety for a required disclosure
Where the personal exposure sits, and what reduces it
How ASIC administers and enforces the sustainability reporting regime
Related questions
Are directors personally liable for climate disclosures?
−
Directors carry their ordinary care and diligence duties in relation to the sustainability report, and they sign a declaration about it. A temporary and partial protection applies to some forward-looking content, but it is narrower than it is usually described and it is closing. This is the one answer that should be read together with your own legal advice.
What is the modified liability period and what does it protect?
+
For financial years commencing between 1 January 2025 and 31 December 2027, statements in your sustainability report about Scope 3 emissions, scenario analysis and transition plans can only be actioned by ASIC or in criminal proceedings. Broader forward-looking climate statements had the same protection only for financial years commencing during 2025. Both windows are closed-ended and neither renews.
What does the board have to sign?
+
The directors’ declaration in the sustainability report. For financial years commencing between 1 January 2025 and 31 December 2027, directors declare they have taken reasonable steps to ensure the report complies with the Corporations Act. From financial years commencing 1 January 2028, they declare their opinion that it does comply.
Other terms in this cluster
Greenwashing (regulatory meaning under ASIC)