Vanguard Australia found guilty of misleading environmental claims

Vanguard ASIC lawsuit: The Federal Court of Australia has ruled against Vanguard's local unit, affirming allegations of misleading assertions concerning the filtration of bond issuers with significant holdings in industries such as fossil fuels, as reported by Australia's securities regulator.

The Australian Securities and Investments Commission (ASIC) revealed on Thursday that Vanguard Investments Australia had assured investors of its fund's capacity to screen out bond issuers engaged in sectors like fossil fuels, contrary to the actual practice.

ASIC highlighted that Vanguard had purported that its index excluded companies heavily involved in various industries, including those associated with fossil fuels. However, Vanguard acknowledged that a substantial portion of securities within the index and the fund were not subjected to research or screening against relevant Environmental, Social, and Governance (ESG) criteria.

The fund under scrutiny, the Vanguard Ethically Conscious Global Aggregate Bond Index Fund, was marketed as eliminating corporate bonds linked to fossil fuels, nuclear power, alcohol, and other sectors, according to information available on Vanguard Australia's website.

In response to these findings, Vanguard stated via email to Reuters, "There was never any intention to mislead, but Vanguard recognises it has not lived up to the high standards it holds itself accountable to and apologizes for the concern this matter may cause for our clients."

ASIC's intensified efforts against Australian firms suspected of making overstated claims regarding their environmentally friendly investments and products, commonly referred to as "greenwashing," have been evident.

The matter is scheduled for further hearing on August 1, during which the court will deliberate on the appropriate penalties for Vanguard's actions, as stated by the regulator.

(With Reuters inputs.)