Vanguard ethical investing claims found to be false
The Federal Court has found Vanguard made a number of false or misleading claims about its sustainable investments.
The Australian Securities and Investments Commission (ASIC) has won its first greenwashing civil penalty action against investment management group Vanguard.
In a ruling from the Federal Court, Vanguard Investments Australia was found to have made false or misleading representations about certain environmental, social and governance (ESG) exclusionary screens that were applied to its index fund.
The action comes about as part of ASIC's broader commitment to protect Australian consumers from harm. Greenwashing, which is when a product is represented as "green" or "environmentally friendly", has become a particular focus for ASIC in the past year as these products become more popular with investors.
The first Federal Court action brought by ASIC for greenwashing was against Mercer Superannuation Australia in February 2023 followed by Vanguard Investments Australia in July 2023.
According to ASIC Deputy Chair Sarah Court, Vanguard by its own admission misled investors on a number of ESG 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."
The Vanguard product in question was the Vanguard Ethically Conscious Global Aggregate Bond Index Fund.
False representations about the index fund's ESG screens were in the product disclosure statements, a media release, on the Vanguard website, in a YouTube interview and a presentation published online.
"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," Court said.
"It sends a strong message to companies making sustainable investment claims that they need to reflect the true position."
A further hearing will be held on 1 August 2024 for a penalty to be imposed.
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