What you need to know
- The Supreme Court of New South Wales has ordered Fiducian Investment Management Services Limited (FIMS) to pay a $7.3 million civil penalty for breaching its duty of care and diligence as a responsible entity and making statements liable to mislead the public about the ESG credentials of its 'Diversified Social Aspirations Fund'.
- This is ASIC's fourth greenwashing civil penalty outcome and the first against the operator of a managed fund for failures in governance, compliance and oversight of ESG claims.
- Importantly, this case is the first greenwashing-related civil penalty outcome in relation to a responsible entity's failure to uphold its duty to act with care and diligence under section 601FC of the Corporations Act 2001 (Cth) (Corporations Act).
What you need to do
- Ensure public statements about the 'green' or ESG credentials of financial products accurately reflect exclusions or other qualifications.
- Exclusions and other investment 'screening' or restrictions should be clearly defined and properly disclosed.
- Responsible entities of managed funds must ensure that internal governance, compliance and monitoring systems support their public ESG statements and the implementation of their ESG policies and objectives, including active oversight of underlying fund managers and their investment strategies and methodologies.
Background
FIMS is a wholly-owned subsidiary of listed entity Fiducian Group Limited and was the trustee and responsible entity of the Diversified Social Aspirations Fund (Fund). The Fund, which was opened in 2015, was established by FIMS in response to demand for an "ethical" or "socially responsible" option for investors, and was closed in 2024.
Rather than investing directly in equities, the Fund allocated capital into underlying funds (Underlying Funds) run by external investment managers, each with their own ESG methodologies and tolerance thresholds. The Fund's Product Disclosure Statement (PDS), issued six times between October 2019 and May 2024, stated that the Fund would invest in companies "that aim to be positive for society and for the environment and aim to avoid investments in harmful activities". The PDS also specified a number of industries or activities the Fund would avoid and stated that FIMS would routinely monitor the portfolio exposure, operations and performance of the Fund.
However, between October 2019 and May 2024, the Underlying Funds held investments in companies that, among other things, derived revenue from fossil fuels.
ASIC's case against FIMS
ASIC commenced proceedings against FIMS in October 2025. In a significant development for greenwashing enforcement, ASIC relied not only on provisions prohibiting misleading or deceptive conduct (here section 12DF of the ASIC Act), but also, for the first time in a greenwashing case, on a responsible entity's duty of care and diligence under section 601FC(1)(b) of the Corporations Act.
ASIC alleged that FIMS would have understood there was a risk that the Underlying Funds would not align with the various ESG representations, and that FIMS as a responsible entity failed to act with care and diligence by not adequately monitoring and managing the Fund. This included specific allegations that:
- FIMS' Investment Committee monitored the investments of the Fund only by reference to its financial performance and not the Fund's objectives or alignment with the ESG statements in the PDS;
- FIMS did not have an ESG expert within the firm assisting in reviewing and monitoring the PDS and the investments of the Fund; and
- FIMS never requested, nor received, a list of shareholdings in the Underlying Funds.
FIMS admitted that it failed to discharge its duties as a responsible entity and contravened provisions prohibiting a person from making false or misleading representations.
The Court's findings
On 11 August 2026, the Supreme Court of New South Wales found that FIMS had failed to act in accordance with its duty of care and diligence as the responsible entity of the Fund. The Court also found that FIMS made statements that were liable to mislead the public about the 'ethical' or 'socially responsible' investment objectives of the Fund and that FIMS did not have reasonable grounds to make those ESG statements.
The Court found governance and oversight failures on FIMS's part, including that it failed to adequately monitor the Fund's underlying investments for alignment with the ESG statements, review the investment strategies of the Underlying Funds, change its underlying investments, or cause the Fund's stated investment objectives to be amended to align with its actual investments. Investor concerns about the Fund's holdings had been raised from at least 2019, yet FIMS failed to appropriately amend or qualify its ESG statements.
Civil penalty
The Court ordered FIMS to pay a $7.3 million penalty. While this is the lowest of the four greenwashing civil penalties to date, it reflects the nature and scale of FIMS's operations, the level of funds under management and the size and resources of Fiducian Group relative to the prior respondents when assessing an appropriate civil penalty. In ASIC's previous greenwashing outcomes, a penalty of $11.3 million was obtained against Mercer Superannuation, $12.9 million against Vanguard Investments Australia and $10.5 million against Active Super.
The Court accepted that, although there was no evidence of any direct financial loss suffered, retail investors were denied the opportunity to make an informed choice between the Fund and other ESG funds available in the market, and that FIMS's contravening conduct eroded confidence in the financial system and consumers' trust in statements made by responsible entities.
ASIC's Chair said investors should be able to trust sustainability-related claims made by investment managers, noting that "[m]ore Australians are seeking investments that align with their ethical, environmental and social values" and that "[t]his case is a reminder that ESG claims must be backed by robust systems, oversight and governance".
Regulatory enforcement horizon
This decision reinforces ASIC's focus not only on the "saying", that is, the misleading or deceptive claim, but also on the "doing": whether an entity is managing and monitoring investments in accordance with its ESG commitments and ensuring systemic compliance throughout its organisation at a policy, practice, investment committee and evidentiary level.
The reliance on the duty of care and diligence under section 601FC of the Corporations Act as an additional cause of action demonstrates that ASIC is expanding the areas of business it seeks to investigate in respect of alleged greenwashing. This is a timely reminder that Australian businesses should carefully consider the adequacy of their compliance systems and controls, not only from a design perspective, but also as a matter of practice — that is, whether the implementation of those systems is in fact ensuring ESG compliance.
Specific steps that companies should consider taking in light of this outcome include ensuring that:
- public statements about the 'green' or ESG credentials of financial products accurately reflect exclusions or other qualifications;
- exclusions and other investment 'screening' or restrictions are clearly defined and properly disclosed;
- internal governance, compliance and monitoring systems support public ESG statements and the implementation of ESG policies and objectives, including active oversight of underlying fund managers and their investment strategies and methodologies;
- personnel with relevant ESG expertise are engaged to assist with reviewing and monitoring of compliance systems and processes.
Authors: Edmond Park, Partner; James Clarke, Partner and Mia Walsh, Lawyer.
Want to know more?
- Australia's greenwashing regulatory landscape: ASIC and the ACCC stay focused (11 May 2026). An overview of Australia's greenwashing enforcement landscape, including ASIC and ACCC civil penalty outcomes against Active Super, Mercer and Vanguard, current proceedings, and the Senate inquiry into greenwashing.
