Vanguard Investments Australia must pay a A$12.9 million ($8.8 million) penalty for making misleading claims about some of its environmental, social and governance fund exclusions, the federal court ruled.
The claims were made in relation to the Vanguard Ethically Conscious Global Aggregate Bond Index Fund, which tracked the Bloomberg Barclays MSCI Global Aggregate SRI Exclusions Float Adjusted Index.
However, Vanguard admitted during a hearing in March that a significant proportion of securities in the index and fund were from issuers that were not researched or screened against applicable ESG criteria.
“By its misleading conduct, Vanguard misrepresented the ‘ethical’ characteristics of the fund,” Justice O’Bryan said in a Sept. 25 statement by Australian Securities and Investments Commission. “Approximately 74% of the securities in the fund by market value were not researched or screened against applicable ESG criteria.”
“Further, Vanguard benefited from its misleading conduct. The misrepresentations enhanced Vanguard’s ability to attract investors to the fund, and enhanced Vanguard’s reputation as a provider of investment funds with ESG characteristics,” he said.
Vanguard made the claims in several public communications including 12 product disclosure statements, a media release, a video posted on YouTube, a presentation and statements on Vanguard’s website.
Vanguard said in a statement on Sept. 25 that it accepts the judgment and takes its regulatory obligations and responsibilities to its clients seriously. Vanguard has over A$14 trillion in assets under management globally as of June 30.
Australian regulators have been cracking down on greenwashing claims. In August, the A$65 billion Mercer Superannuation was ordered to pay an A$11.3 million penalty for misleading statements on its sustainable plus options that had investments in companies involved in carbon-intensive fossil fuels, alcohol and gambling.
