Northern Trust Asset Management Australia (Northern Trust) has coughed up $29,820 to comply with two infringement notices issued by the Australian Securities and Investments Commission (ASIC) over allegations of greenwashing.

The infringement notices were triggered by concerns about false and misleading statements regarding the application of a Carbon Emissions Exclusion Screen in the Product Disclosure Statements (PDSs) of the NT World Green Transition Index Fund, which the company manages. The PDSs claimed to exclude companies that derive 5% or more of their total annual revenues from thermal coal-based power generation and have a low carbon transition management score quartile of 3 or 4.

However, ASIC was concerned that the information in the PDSs wasmisleading as the Carbon Emissions Exclusion Screen was not properly applied.

At least three companies were not excluded by MSCI despite failing the low carbon transition management score quartile, leading to an error in applying the Carbon Emissions Exclusion Screen. The affected holdings included DTE Energy, NiSource, and Power Assets Holding. The issue occurred from around 1 December 2022 to 28 July 2023. Northern Trust subsequently disposed of the holdings.

"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," stated ASIC Deputy Chair Sarah Court. "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. The statement noted payment of an infringement notice is not an admission of liability.

The action against Northern Trust is part of a growing list of infringement notices issued by ASIC to companies for alleged greenwashing. Previous recipients include Tlou Energy Limited, Vanguard Investments Australia, Diversa Trustees Limited, Future Super Investment Services Pty Ltd, and Black Mountain Energy.

Currently, ASIC has three greenwashing / ESG civil penalty cases before the Federal Court against Mercer Super, Vanguard Investments Australia, and Active Super.