“ASIC’s First Court Win: Vanguard Found Guilty of Greenwashing”
Australia’s corporate regulator has achieved a significant milestone by securing its first civil penalty against a major investment group for engaging in “greenwashing,” marking a pivotal moment in the fight against misleading environmental claims.
Vanguard Investments Australia, a division of the renowned Vanguard Group based in the United States, has confessed in the Federal Court to conduct that could mislead the public and to making false or deceptive representations. The allegations pertain to assertions regarding environmental, social, and governance (ESG) exclusionary screens implemented in Vanguard’s Ethically Conscious Global Aggregate Bond Index Fund.
The fund, managing assets worth $1 billion as of February 2021, became the subject of ASIC’s civil claim, focusing on its promotion between August 2018 and February 17, 2021. Vanguard marketed the fund as an “ethically conscious investment opportunity,” claiming exclusion of companies heavily involved in various industries, including fossil fuels.
However, Vanguard has conceded that a notable portion of securities in the Index and the fund did not undergo scrutiny against applicable ESG criteria. The misleading representations were disseminated through multiple channels, including 12 product disclosure statements, a media release, Vanguard’s website, a Finance News Network interview on YouTube, and an online presentation at a Finance News Network fund manager event.
ASIC’s deputy chair, Sarah Court, emphasized the significance of the court ruling in combating misleading financial services marketing, particularly in the realm of sustainable investments. The case underscores ASIC’s dedication to challenging greenwashing practices and ensuring transparency in the financial sector.
In his judgment, Justice O’Bryan acknowledged Vanguard’s admission to most of ASIC’s allegations but noted ongoing disputes over certain liability issues. The court has scheduled further hearings on August 1, 2024, to determine the penalty for Vanguard’s conduct. This landmark case serves as a stern warning to companies making unsubstantiated sustainable investment claims, compelling them to align their marketing with genuine practices and principles.
