Australia’s corporate regulator launched legal action against pension fund Mercer Superannuation on Tuesday, accusing it of misleading members about the sustainability of some of its investment options.

The Australian Securities & Investments Commission’s (ASIC) said this was its first court action alleging “greenwashing”, or exaggerated claims of environment-friendly investment and products, which has garnered increased attention as interest rises in sustainable and ethical investment options.

ASIC said last year it was stepping up oversight of climate-related reporting and was investigating several companies and financial institutions for suspected greenwashing.

Mercer said in a statement that it has cooperated with ASIC throughout its investigation and that it would be inappropriate to comment further as the matter is now before the courts.

The regulator’s case refers to Mercer statements on its website about seven “Sustainable Plus” investment options, which were marketed as suitable for members “deeply committed to sustainability” since the options excluded investments in companies involved in carbon-intensive fossil fuels, such as thermal coal, or in alcohol production and gambling.

However, those investment options had holdings in companies such as BHP Group (BHP.AX), the world’s largest listed miner, and Australia’s top power producer and carbon emitter AGL Energy (AGL.AX), among others that the statements had indicated would be excluded, the regulator said.

The investment options also listed holdings in 15 alcohol production companies, including Budweiser Brewing Company APAC Ltd, Carlsberg AS, Heineken Holding NV and Treasury Wine Estates Ltd, and 19 companies involved in gambling, including Aristocrat Leisure Limited, Caesar’s Entertainment Inc, Crown Resorts Limited and Tabcorp Holdings Limited.

“In doing so, ASIC alleges Mercer made false and misleading statements and engaged in conduct that could mislead the public,” ASIC said.

“There is increased demand for sustainability-related financial products, and with that comes the growing risk of misleading marketing and greenwashing.”

Activist investor group Market Forces said ASIC’s legal action should send shockwaves through the superannuation industry and through corporate Australia more broadly.

“Greenwashing needs to be stamped out because it’s undermining real climate action and potentially misleading millions of super fund members,” said Brett Morgan, Superannuation Funds Campaigner at Market Forces.

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