ASIC issues infringement notices to Morningstar for “controversial weapons investments”

The Australian Securities and Investments Commission (ASIC) has announced Morningstar has paid $29,820 to comply with two infringement notices in which ASIC alleged its investor funds were exposed to controversial weapons investments, despite Morningstar’s Environmental, Social and Corporate Governance (ESG) policy stating that such investments would be excluded.
According to the regulator, Morningstar’s Product Disclosure Statement for one of its funds stated it would exclude certain sectors based on the ESG factors and, according to its policy, the fund would not have exposure to investments in controversial weapons companies.
ASIC has found that the Morningstar International Shares (Unhedged) Fund held direct exposure for short periods of time in the following companies:
- Honeywell International Inc; (from 2 November to 18 November, 2022)
- General Dynamics Corp; (from 31 May to 13 June, 2023)
- Leidos Holdings Inc; (from 31 May to 13 June, 2023)
- Northrop Grumman Corp; (from 31 May to 13 June, 2023)
- Raytheon Technologies Corp. (from 31 May to 13 June, 2023)
Morningstar’s ESG research arm, Sustainalytics, identifies that the above companies are involved in controversial weapons, specifically the development or production of nuclear weapons or providing core components for them.
ASIC said that Morningstar had reported these incidents and paid the infringement notices on 30 November 2023.
The regulator added that “payment of an infringement notice is not an admission of guilt or liability”.
Separately, ASIC has issued infringement notices in response to concerns about alleged greenwashing against Tlou Energy Limited, Vanguard Investments Australia and Diversa Trustees Limited.
ASIC currently has three greenwashing-related cases before the Federal Court, including against Mercer Super, Vanguard Investments Australia and Active Super.
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