ASIC prevails in Vanguard's first greenwashing civil penalty action.

Vanguard Investments Australia was found to have broken the law by the Federal Court when it made false statements regarding certain environmental, social, and governance (ESG) exclusionary screens that were applied to investments made in Vanguard index funds. Vanguard acknowledged that it had made false or misleading statements and that it had engaged in behaviour that could have misled the public at a hearing before Justice O'Bryan on March 8, 2024. Judge O'Bryan concluded on March 28, 2024, that Vanguard had repeatedly violated the ASIC Act by making false or deceptive claims regarding the ESG exclusionary screenings that were implemented on the Vanguard Ethically Conscious Global Aggregate Bond Index Fund

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These representations were made to the public in a range of communications, including:

  • 12 product disclosure statements

  • a media release

  • statements published on Vanguard’s website

  • a Finance News Network interview on YouTube, and

  • a presentation at a Finance News Network Fund Manager Event which was published online.

Investments held by the Fund were based on an index called the Bloomberg Barclays MSCI Global Aggregate SRI Exclusions Float Adjusted Index (Index). Vanguard had claimed the Index excluded only companies with significant business activities in a range of industries, including those involving fossil fuels, but has admitted that a significant proportion of securities in the Index and the Fund were from issuers that were not researched or screened against applicable ESG criteria.

ASIC Deputy Chair Sarah Court said, ‘By Vanguard’s own admission, it misled investors on a number of its claims.

‘In this case, Vanguard promised its investors and potential investors that the product would be screened to exclude bond issuers with significant business activities in certain industries, including fossil fuels, when this was not always the case.

‘As ASIC’s first greenwashing court outcome, the case shows our commitment to taking on misleading marketing and greenwashing claims made by companies in the financial services industry. It sends a strong message to companies making sustainable investment claims that they need to reflect the true position.’

The matter has been listed for further hearing on 1 August 2024 at which the Court will consider the appropriate penalty to impose for the conduct.

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