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ASIC wins landmark greenwashing case against Vanguard

2 April 2024 
Marie Khoury        

ASIC has won a Federal Court case against global investment giant Vanguard over allegations of greenwashing. 

Greenwashing is a practice where companies overstate their green credentials, or are unclear on the standards used to assess their product as environmentally friendly or socially responsible. 

Vanguard is a passive investment giant that operates an APRA-regulated super fund and several retail investment products in Australia.

The fund in trouble with ASIC was its ‘Ethically Conscious Global Aggregate Bond’ index fund.  

ASIC first took legal action against Vanguard in 2023, alleging the fund made false and misleading statements in saying that all securities in the indexed fund were screened against certain ESG claims in its product disclosure statement, a media release, a media interview and an event presentation.

 

ASIC claimed it found at least 14 issuers, that collectively issued at least 27 bonds in the fund, violated these criteria as of February 2021. These bonds exposed investors to holdings which had ties to fossil fuels.

Last Thursday, The Federal Court ruled that Vanguard Investments Australia misled investors about certain environmental, social and governance exclusionary screens applied to investments in a Vanguard index fund, worth more than $1 billion.

This civil case is ASIC's first greenwashing court outcome. The verdict comes as the federal government also puts a spotlight on greenwashing, tabling legislation, climate risk reporting obligations for fincnaical firms, including super funds.

At the Investment Magazine Chair Forum last month, ASIC deputy chair Sarah Court urged funds not to throw around descriptions like “carbon neutral”, “clean”, or “green” without reasonable ground just because it’s what the competitors are doing.   

 

The matter has been listed for further hearing on the 1 August at which the Court will consider the appropriate penalty.

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