The ASIC has begun court action against Vanguard Investments Australia, accusing it of making misleading claims about one of its ESG funds.
The Vanguard Ethically Conscious Global Aggregate Bond Index Fund, launched in 2018, claimed to exclude investments related to fossil fuels, but according to ASIC, significant research on bond issuers was not conducted, thereby exposing investors to fossil fuel-related investments.
ASIC alleges that Vanguard misled the public through various statements and disclosures from August 2018 to February 2021. The regulator considers this to be an instance of greenwashing, a term used to describe misleading environmental claims.
In response, Vanguard acknowledged the issue and detailed actions taken to strengthen its product disclosure process, including appointing a Head of ESG product, enhancing compliance, due diligence, and technology investments.
This legal action is part of a broader effort by ASIC to monitor and act against misleading sustainability claims, following other infringement notices and suits against investment managers.
Vanguard has been proactive in informing its clients of the discrepancy in its ESG fund and has taken several steps to ensure transparency and enhancement in its disclosure process. The regulator’s intensified focus on greenwashing indicates a growing commitment to protect investors from misleading information regarding ethical and sustainable investment products.
ASIC Deputy Chair Sarah Court said, “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.”
In an official statement, Vanguard affirmed, “Vanguard is committed to serving our clients ESG investing needs and will continue to enhance our ESG product management, oversight and disclosure, in addition to actively working with the industry, policy makers and regulators in pursuit of continuous improvement in this space.”
Court further added, “ASIC will continue its focus on alleged greenwashing conduct and we continue to stress to the financial services industry that if exclusions in investments are promised, these exclusions need to be applied and promises upheld.”
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