Greenwashing in Australia. From branding issue to capital markets risk.
Greenwashing has evolved from a marketing irritation into a material legal and investment risk in Australia. Environmental claims are now assessed against consumer law, financial services law and corporate disclosure obligations, not marketing intent. This shift has profound implications for how capital is allocated and how risk is priced.
A series of court decisions and regulatory actions have made one point clear. Sustainability claims must be precise, provable and aligned with operational reality. When they are not, the consequences are increasingly severe.
What is greenwashing?
Greenwashing occurs when a company presents products, services or operations as environmentally responsible without sufficient factual basis. This can involve false claims, exaggerated benefits, selective disclosure or vague language that implies environmental leadership without measurable outcomes (1).
In Australia, greenwashing most often arises through claims of carbon neutrality, net zero alignment or sustainable investing that rely heavily on carbon offsets or future intentions rather than current emissions reduction (2). Visual cues, branding and carefully framed language frequently reinforce these claims.
This behaviour cuts across sectors including energy, financial services, aviation, retail and consumer goods (3)(4)(5).
Why greenwashing matters to investors
Greenwashing presents three clear risks for investors.
The first is regulatory risk. Misleading environmental claims can breach Australian Consumer Law and, for financial products, the Corporations Act. ASIC has explicitly identified greenwashing as an enforcement priority.
The second is reputational risk. Once greenwashing claims are challenged publicly, brand damage is often rapid and persistent, particularly where trust is central to the business model.
The third is strategic risk. Companies that overstate their transition credentials may be poorly positioned for tightening climate policy, higher carbon costs and changing consumer preferences. Investors relying on these claims risk mispricing long duration assets.
Early warning sign. Lorna Jane.
Australia’s first major greenwashing case involved Lorna Jane, which was fined after the Federal Court found its claims that products were “carbon neutral” were misleading and lacked reasonable grounds.
This case established an important principle. Environmental claims require the same evidentiary standard as any other representation to consumers. Good intentions or partial measures are not sufficient.
Financial markets enforcement. Vanguard and Mercer.
Regulatory focus intensified when ASIC turned its attention to financial products.
In 2023, Vanguard Investments Australia was penalised after ASIC alleged it misrepresented the ESG screening applied to an index fund. As reported by ASIC, marketing materials implied broader exclusions than were actually implemented.
That same year, Mercer Superannuation faced ASIC proceedings over sustainability representations that were alleged to overstate how ESG considerations influenced investment decisions.
These cases raised by ASIC were pivotal for investors. They confirmed that sustainability claims attached to financial products are regulated in the same way as performance, risk and fee disclosures.
EnergyAustralia. A defining escalation.
The case involving EnergyAustralia therefore represented an escalation rather than a starting point. Building on earlier enforcement, it directly challenged carbon neutral marketing based on offsets.
Brought by Parents for Climate, the case argued that claiming household electricity and gas were carbon neutral was misleading because offsets do not undo the harm caused by burning fossil fuels.
EnergyAustralia settled the case, discontinued its “Go Neutral” product and issued a public statement acknowledging that carbon offsetting does not prevent or undo emissions harm. It also apologised to customers for unclear marketing.
This acknowledgement materially shifted the debate. It placed offset based carbon neutral claims under sustained scrutiny and raised questions about voluntary certification schemes.
Carbon offsets. The recurring fault line.
In our view offsets sit at the centre of many Australian greenwashing cases. While high quality offsets can play a role in managing residual emissions, problems arise when they are used as a substitute for direct emissions reduction or underpin broad environmental claims.
Concerns raised in the EnergyAustralia case around avoidance credits, permanence and additionality echo earlier criticism of offset heavy strategies across multiple sectors.
For investors, heavy reliance on offsets should trigger deeper due diligence, not comfort.
What investors should be wary of
Investors assessing climate aligned opportunities should apply the same discipline used for financial analysis.
Key questions include whether emissions reductions are absolute or intensity based, how material offsets are to overall claims, and whether capital expenditure supports stated transition pathways.
Governance is critical. Investors should examine whether sustainability claims are overseen at board level, embedded in incentive structures and consistently disclosed across annual reports, investor presentations and marketing materials.
Greenwashing thrives in ambiguity. Credible strategies are measurable, transparent and verifiable.
The bottom line
Greenwashing in Australia is no longer a peripheral concern. It is a material legal, reputational and financial risk. The enforcement path began with consumer brands, moved through financial products and culminated in the EnergyAustralia settlement, which crystallised the limits of carbon neutral marketing.
For investors, the message is unambiguous. Sustainable investing is not about labels or slogans. It is about evidence, execution and accountability. Capital will increasingly reward companies that demonstrate genuine transition progress and penalise those that rely on marketing gloss.
In Australia’s regulatory environment, authenticity has become investable.
References
McLeod C, The Guardian, EnergyAustralia is in court accused of greenwashing. What is the case about and why is it significant? 14 May 2025. https://www.theguardian.com/australia-news/2025/may/14/energy-australia-is-in-court-accused-of-greenwashing-what-is-the-case-about-and-why-is-it-significant
Morton A, The Guardian, EnergyAustralia apologises to 400,000 customers and settles greenwashing legal action. 19 May 2025. https://www.theguardian.com/australia-news/2025/may/19/energy-australia-apologises-to-400000-customers-and-settles-greenwashing-legal-action
Australian Competition and Consumer Commission, Federal Court orders Lorna Jane to pay $5m for false and misleading carbon neutral claims. 22 July 2021.
https://www.accc.gov.au/media-release/federal-court-orders-lorna-jane-to-pay-5m-for-false-and-misleading-carbon-neutral-claimsAustralian Securities and Investments Commission, ASIC issues infringement notices against investment manager for greenwashing. 8 December 2022.
https://asic.gov.au/about-asic/news-centre/find-a-media-release/2022-releases/22-336mr-asic-issues-infringement-notices-against-investment-manager-for-greenwashing/Australian Securities and Investments Commission, ASIC launches first Court proceedings alleging greenwashing. 28 February 2023.
https://asic.gov.au/about-asic/news-centre/find-a-media-release/2023-releases/23-043mr-asic-launches-first-court-proceedings-alleging-greenwashing/
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