ASIC secures greenwashing court win against Vanguard

The Australian Securities and Investments Commission (ASIC) has broken new ground securing a Federal Court win over Vanguard Investments Australia over greenwashing.

ASIC said that the Federal Court had found Vanguard Investments Australia contravened the law by making misleading claims about certain environmental, social and governance (ESG) exclusionary screen applied to investments in a Vanguard index fund.

It said that at a hearing before Justice O’Bryan today, Vanguard admitted to engaging in conduct that was liable to mislead the public and that it had made reprsentations that were false or misleading.

“On 28 March 2024, Justice O’Bryan found that Vanguard contravened the ASIC Act numerous times when it made false or misleading representations about the ESG exclusionary screens that were applied to the Vanguard Ethically Conscious Global Aggregate Bond Index Fund,” an ASIC statement said.

“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.”

Comnmenting on the outcome, 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.”