Vanguard Australia faces greenwashing claims as ASIC launches proceedings

The Australian Securities and Investment Commission (ASIC) has launched legal proceedings against Vanguard Investments Australia, alleging misleading conduct in relation to claims about ESG exclusionary screens applied to investments.

ASIC alleges Vanguard made false and misleading statements when claiming that all securities in the Vanguard Ethically Conscious Global Aggregate Bond Index Fund screened against certain ESG criteria.

Investments held by the ETF were based on the Bloomberg Barclays MSCI Global Aggregate SRI Exclusions Float Adjusted Index. 

Vanguard claimed the index excluded issuers with significant business activities in a range of industries, including those involving fossil fuels. 

However, ASIC alleges that ESG research was not conducted over a significant proportion of issuers of bonds in the index.

Sarah Court, deputy chair of ASIC, said: “We know that investors are increasingly seeking investment options that exclude certain industries, and investors need to be able to rely on investment screens to help them make these choices."

Court explained that “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. We consider that the screening and research undertaken on behalf of Vanguard was far more limited than that being promised to investors, and we consider this constitutes another example of greenwashing.”

ASIC further alleges Vanguard misled the public in statements published between 7 August 2018 and 17 February 2021, including media releases, event presentations, and a statement published on its website.

The regulatory body has already fined Vanguard Australia AUD $39,960 against a separate incident of greenwashing, in which the asset manager was found to make misleading statements on the Vanguard International Shares Select Exclusions Index Funds and its capacity to screen significant tobacco sales.

Vanguard response

Responding to the most recent action taken by ASIC, a statement by Vanguard Australia read: “In early 2021, Vanguard Investments Australia self-identified and self-reported a breach to our regulator, ASIC, in relation to the product disclosure for the Vanguard Ethically Conscious Global Aggregate Bond Index Fund and ETF."

The company added that “as soon as the disclosure weakness was identified, Vanguard acted swiftly to inform investors and enhance the disclosure. We have fully cooperated with ASIC’s queries on the matter since it was first self-reported. There was never any intention to mislead, but Vanguard recognises it has not lived up to the high standards it holds itself accountable to and apologises for the concern this matter may cause for our clients.”

With over AUD $12 trillion in assets under management globally as of 30 June 2023, including over AUD $3.4 trillion in ETFs, Vanguard is one of the world’s largest global investment management companies.

Last year, Vanguard made headlines when it exited the Net Zero Asset Managers Alliance.