Australia’s largest penalty to date for greenwashing has been handed down by the Federal Court.
In the judgement, Justice Michael O’Bryan ordered Vanguard Investments Australia to pay a $12.9 million penalty for making misleading claims about environmental, social and governance (ESG) exclusionary screens, applied to investments in their Ethically Conscious Global Aggregate Bond Index Fund.
Australian Securities & Investments Commission (ASIC) Deputy Chair Sarah Court said greenwashing was a serious threat to the integrity of the Australian financial system.
“This is an important decision and the penalty imposed is the highest yet for greenwashing conduct,” Ms Court said.
“Vanguard admitted it misled investors that these funds would be screened to exclude bond issuers with significant business activities in certain industries, including fossil fuels, when this was not always the case.”
Ms Court said it was essential companies did not misrepresent that their products or investment strategies were environmentally friendly, sustainable, or ethical.
“The size of the penalty should send a strong deterrent message to others in the market to carefully review any sustainable investment claims.”
In handing down the judgement, Justice O’Bryan said Vanguard’s contraventions should be regarded as serious.
“Vanguard’s misrepresentations concerned the principal distinguishing feature of the Fund, being its ‘ethical’ characteristics. Vanguard developed and promoted the Fund in response to market demand for investment funds having those characteristics,” Justice O’Bryan said.
“Approximately 74 percent of the securities in the Fund by market value were not researched or screened against applicable ESG criteria.”
Ms Court said the claims were made in a range of public communications, including:
- 12 product disclosure statements.
- A media release.
- Statements published on Vanguard’s website.
- A Finance News Network interview on YouTube.
- A presentation at a Finance News Network Fund Manager Event which was published online.
