The Federal Court today ordered Vanguard Investments Australia to pay a $12.9 million penalty for making misleading claims about environmental, social and governance (ESG) exclusionary screens.
These screens were applied to investments in the Vanguard Ethically Conscious Global Aggregate Bond Index Fund.
今日热门事件Deputy Chair Sarah Court said, 鈥楾his is an important decision and the penalty imposed is the highest yet for greenwashing conduct. Greenwashing is a serious threat to the integrity of the Australian financial system, and remains an enforcement priority for ASIC.
鈥榁anguard admitted it misled investors that these funds would be screened to exclude bond issuers with significant business activities in certain industries, including fossil fuels, when this was not always the case.聽
鈥業t is essential that companies do not misrepresent that their products or investment strategies are environmentally friendly, sustainable, or ethical. The size of the penalty should send a strong deterrent message to others in the market to carefully review any sustainable investment claims.鈥�
Justice O鈥橞ryan said 鈥榁anguard鈥檚 contraventions should be regarded as serious. Vanguard鈥檚 misrepresentations concerned the principal distinguishing feature of the Fund, being its 鈥渆thical鈥� characteristics. Vanguard developed and promoted the Fund in response to market demand for investment funds having those characteristics.
鈥楤y its misleading conduct, Vanguard misrepresented the 鈥渆thical鈥� characteristics of the Fund. Approximately 74% of the securities in the Fund by market value were not researched or screened against applicable ESG criteria. Further, Vanguard benefited from its misleading conduct. The misrepresentations enhanced Vanguard鈥檚 ability to attract investors to the Fund, and enhanced Vanguard鈥檚 reputation as a provider of investment funds with ESG characteristics, as compared to what would have been the case if Vanguard had accurately disclosed the ESG screening limitations and the Fund鈥檚 exposure to issuers engaged in the excluded industries.鈥�
The claims were made in a range of public communications, including:
- 12 product disclosure statements
- A media release
- Statements published on Vanguard鈥檚 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. 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 certain securities in the Index and the Fund were from issuers that were not researched or screened against applicable ESG criteria.
Download
Background
Today's outcome follows ASIC's successful greenwashing outcome in its civil penalty proceeding against Mercer Super where the court ordered Mercer to pay a civil penalty of $11.3 million. See 24-173MR.
As of 26 February 2021, the total funds or assets under management of the Vanguard Ethically Conscious Global Aggregate Bond Index Fund was over $1 billion.
The Fund is a registered managed investment scheme, of which Vanguard is the Responsibility Entity and the Investment Manager. The Fund comprises the ETF, AUD Hedged, and NZD Hedged classes of units.
础厂滨颁鈥檚 Information Sheet 271鈥�How to avoid greenwashing when offering or promoting sustainability-related products (INFO 271) provides information for responsible entities of managed funds and super fund trustees about how to avoid greenwashing when offering or promoting sustainability-related or ethical products and investments.
础厂滨颁鈥檚 Report 791 础厂滨颁鈥檚 recent greenwashing interventions outlines 今日热门事件regulatory interventions made between 1 April 2023 and 30 June 2024 in relation to greenwashing concerns.
础厂滨颁鈥檚 Moneysmart website has a range of tools and resources to help people understand money and how to manage it. Find out more about what .
Original MR: 今日热门事件wins first greenwashing civil penalty action against Vanguard 24-061MR.