The Australian Securities and Investments Commission (ASIC) has won its greenwashing civil penalty action against Vanguard.

The Federal Court has found Vanguard Investments Australia contravened the law by making misleading claims about certain environmental, social and governance (ESG) exclusionary screens applied to investments in a Vanguard index fund.

At a hearing before Justice O’Bryan on 8 March 2024, Vanguard admitted to engaging in conduct that was liable to mislead the public and that it had made representations that were false or misleading.

On 28 March 2024, Justice O’Bryan found that Vanguard contravened the ASIC Act numerous times when it made false or misleading representations about the ESG exclusionary screens that were applied to the Vanguard Ethically Conscious Global Aggregate Bond Index Fund.

These representations were made to the public in a range of communications, including:

• 12 product disclosure statements
• a media release
• statements published on Vanguard’s website
• a Finance News Network interview on YouTube, and
• a presentation at a Finance News Network Fund Manager Event which was published online.

Investments held by the Fund were based on an index called the Bloomberg Barclays MSCI Global Aggregate SRI Exclusions Float Adjusted Index (Index). Vanguard had claimed the Index excluded only companies with significant business activities in a range of industries, including those involving fossil fuels, but has admitted that a significant proportion of securities in the Index and the Fund were from issuers that were not researched or screened against applicable ESG criteria.

The matter has been listed for further hearing on 1 August 2024 at which the Court will consider the appropriate penalty to impose for the conduct.