The Australian Securities and Investments Commission (ASIC) has won its action for civil penalties against Vanguard.
The Federal Court has found that Vanguard Investments Australia breached the law by making misleading claims about certain environmental, social and governance (ESG) exclusion screens applied to investments in a Vanguard index fund.
At a hearing before Judge O’Bryan on March 8, 2024, Vanguard admitted to engaging in conduct likely to mislead the public and to having made statements that were false or misleading.
On 28 March 2024, Judge O’Bryan found that Vanguard breached ASIC law on multiple occasions when it made false or misleading statements about the ESG exclusion screens applied to the Vanguard Ethically Conscious Global Aggregate Bond Index Fund.
These representations were made to the public in a number of communications, including:
- 12 product disclosure statements
- a media release
- statements posted on Vanguard’s website
- an interview with the Finance News Network on YouTube and
- a presentation at a Finance News Network Fund Manager event posted online.
The 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 that the index excluded only companies with significant business operations in a range of industries, including those involving fossil fuels, but admitted that a significant percentage of the Index and Fund securities came from issuers that had not been researched or screened against ESG criteria.
The matter has been listed for a further hearing on 1 August 2024 at which the Court will consider the appropriate penalty to impose for the conduct.