Posted inESG

Vanguard hit with greenwashing lawsuit in Australia

Vanguard is alleged to have misled the public over its Vanguard Ethically Conscious Global Aggregate Bond Index Fund (Hedged) fund.
Greenwashing is a communication technique aimed at building a false image of a company in terms of environmental impact

Australia’s corporate regulator has tabled a lawsuit against the local unit of Vanguard for alleged greenwashing.

The Australian Securities & Investments Commission (ASIC) alleges that the US-headquartered investment manager misled the public over its Vanguard Ethically Conscious Global Aggregate Bond Index Fund (Hedged) Fund.

According to ASIC, investments held by the fund were based on the Bloomberg Barclays MSCI Global Aggregate SRI Exclusions Float Adjusted index, which claims to exclude issuers with significant business activities in a range of industries including fossil fuels. However, ASIC alleges that ESG research was not conducted over a large number of bond issuers in the index and therefore the Vanguard fund too.

As of February 2021, ASIC alleges that 42 issuers included in the index violated the applicable ESG criteria, while for the fund, the number was 14.

“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,” said ASIC deputy chair Sarah Court.

“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.”

Vanguard did not respond to multiple requests for comment from ESG Clarity.

ASIC has been on a rampage in cracking down on greenwashing lately, issuing over A$140,000 ($95,000) in infringement notices in response to concerns about alleged greenwashing having only issued its first ever fine in October last year against ASX-listed Tlou Energy.

Australia’s regulators including ASIC have made greenwashing a top enforcement priority in recent years.

This story first appeared on our sister publication, ESG Clarity.

Part of the Mark Allen Group.