Superannuation greenwashing is rife: Will a new labelling system make it worse?
AustralianSuper backflips on coal, as proposal for a new labelling scheme raises concerns.
Cate Cooper has been with AustralianSuper ever since she moved to Australia in 2008. The hotelier in the Coonawarra wine region of South Australia says she, much like the area she lives in, is proud of being “clean and green”.
Last year, however, after reading news reports of AustralianSuper’s reinvestment in big coal companies, she wrote to her super fund to express her concern and to try to get some answers.
“I would sign petitions, write emails and things like that. Responses would come back months later, copy and paste responses that didn’t address any individual issues raised,” she says.
In the last 12 months, AustralianSuper have backflipped on their 2020 divestment from Whitehaven coal, purchasing shares worth around $400 million and becoming the largest single shareholder in the company.
AustralianSuper tells us they remain committed to reaching net zero by 2050, but activist groups such as Market Forces say that is simply “greenwashing” given Whitehaven’s massive coal mining expansion plans around Australia.
In the last 12 months, AustralianSuper have backflipped on their 2020 divestment from Whitehaven coal, purchasing shares worth around $400 million
“AustralianSuper is greenwashing by suggesting that its massive stake in Whitehaven is consistent with its climate commitments,” Brett Morgan, senior superannuation funds analyst at Market Forces says.
Cate felt the same.
“I didn’t get the response I wanted to hear when I inquired about fossil fuels. Eventually I just decided there was no hope here and voted with my money.”
Cate moved her around a quarter of a million dollars out of AustralianSuper to a fund she felt more ethically aligned with. In a world of confusing fund names and labels and competing claims, it’s a move few Australians make and one that advocates say could be about to get harder.
Treasury consulting on new sustainable labels
The federal Treasurer Jim Chalmers has instructed Treasury to come up with a new labelling scheme for financial products. The idea is that clearer, better defined and common rules for using terms such as “green”, “environmental” and “sustainable” will unlock greater levels of green investment from private capital, in line with the federal government’s Net Zero goals.
Submissions on the Sustainable Financial Product Label Policy Framework closed in March and Treasury has yet to announce their next steps or what direction the policy will take.
Super Consumers Australia’s Susan Quinn says one proposal is a “loose and principles-based” disclosure scheme that could lower the threshold for the quality of evidence required to substantiate sustainability claims and make greenwashing harder to detect and enforce.
“No doubt the super funds’ marketing teams would love it. But it would make things even harder and less certain for people who are navigating green claims by super funds. And it could seriously undermine the effectiveness of anti-greenwashing laws that we already have,” she says.
The government is proposing a new labelling scheme for financial products.
Industry advocates say the proposed changes won’t help
In the last two years, the Australian Securities and Investments Commission (ASIC) has taken major high-profile legal action against a number of super funds for greenwashing. In 2024, Mercer was ordered to pay over $11 million by the Federal Court for misleading customers and Active Super copped a penalty of over $10 million for greenwashing misconduct in 2025.
Quinn says these recent actions show that the current system is already working to prevent greenwashing and that Treasury’s new labelling proposals are trying to fix a problem that doesn’t exist and may make it easier for the super funds to get away with greenwashing.
“People who are interested in green investment have been shocked to find out that their supposedly sustainable super is still sitting in fossil fuels or other things that are big no-nos for them. Super funds could do so much better to help people understand what their sustainable products really are. A start would be to just be open about all the companies they’re invested in,” she says.
Quinn says that Treasury’s new labelling proposals are trying to fix a problem that doesn’t exist and may make it easier for the super funds to get away with greenwashing.
She says it’s hard to see how a loose labelling scheme is going to make the general public’s understanding of what these products mean better.
“We keep seeing funds do things like apply ‘tolerances’ for fossil fuel investments. So they’ll still invest in a company that makes money from fossil fuels, as long as it’s below a certain portion of the company’s revenue. Then they’ll slap a ‘sustainable’ label on the super product. This means lots of disclaimers in the fine print and we want to see regulators do more to clamp down on it,” Quinn adds.
Industry backs reforms
While industry advocates are skeptical of the proposed changes, those within the superannuation industry have a different perspective. Louise Davidson, CEO of the Australian Council of Superannuation Investors, which is the peak body representing industry super funds, says the Council supports the Treasury consult’s principles of improving customer understanding.
“It’s a very complex area, and we would like to see product innovation continue. There’s a balance but we think there is an opportunity to leverage existing laws and also enhance the information available to retail investors and superannuation members to minimise both complexity and compliance burden,” she says.
Criteria must be scientifically-based
Katarina Thompson, the acting managing lawyer at the Environmental Defenders Office, takes a balanced view, agreeing that a new labelling regime could be positive, but with the caveat that it has to be “done right”.
“Changes could be really positive, as long as the regime is robust and any criteria used to verify the financial products are scientifically-based,” she says.
She says the current way of operating is far too complicated for consumers, who have to investigate and interrogate products to understand what super funds are doing with their money, even when they claim to be in “green” or “ethical” fund options.
“There is a lot of vague language and language that is not necessarily backed up by publicly available, independently verified science being used in the superannuation space. That is really problematic for consumers’ ability to check the veracity of the claims being made. There is a lot of room for improvement,” Thompson says.
Concerns that the new scheme might mislead consumers
However, advocates remain concerned that the proposed idea of introducing “thresholds” for what level of a product’s investments can be not aligned with environmentally sustainable investments is a worrying precedent.
One of the proposals being considered by Treasury in the consultation is that investment products with less than 30% exposure to unaligned investments be considered to meet the threshold to use certain sustainability labels.
“Any product claiming ‘green’ or ‘sustainable’ labelling should not be exposed to companies expanding fossil fuel production, not at all, in any way,” Brett Morgan from Market Forces says.
Quinn says the government needs to conduct independent testing to gather evidence about what Australian consumers think and expect each of these environmental labels to mean and make sure the new scheme abides by these expectations.
If the government forges ahead with a labelling scheme without rigorous consumer testing built in, it’s pretty much guaranteed to enable more greenwashing – Susan Quinn, Super Consumers Australia
“We’re concerned that the super industry is trying to shape a labelling regime that works for them, not the people it’s really supposed to benefit. There’s a big disconnect between what people at super funds think is sustainable or green, and what millions of people across Australia think,” she says.
“If the government forges ahead with a labelling scheme without rigorous consumer testing built in, it’s pretty much guaranteed to enable more greenwashing,” Quinn adds.
A spokesperson for Treasurer Jim Chalmers’ office says ensuring markets and consumers have clear and credible information on climate and sustainability, including in superannuation, will be key to achieving net zero.
“Our government has always taken a consultative approach on these issues, which is why we have recently consulted on options to make sustainable financial products easier to understand and assess,” they say.
