The Australian Securities and Investments Commission (ASIC) has issued three infringement notices to wealth manager Vanguard Investments Australia as a result of alleged greenwashing involving the organisation’s funds.
The corporate regulator raised concerns over an investment filter communicated in the product disclosure statement (PDS) regarding the Vanguard International Shares Select Exclusions Index Funds. Specifically, the manager claimed the offering would track the return of the Morgan Stanley Capital International (MSCI) World Index ex Tobacco whereby the investment process of the funds would prevent allocations to companies involved with the production, manufacturing or significant sales of tobacco products.
However, upon deeper analysis, ASIC found while the screen did mean Vanguard Investments Australia avoided investments in companies that manufacture cigarettes and other tobacco, it was not sufficient to prevent the manager from allocating funds to organisations involved in the sale of tobacco products, making the statements in the PDS misleading.
The PDS material leading to the infringement was available between September 2017 and May 2022 via the Vanguard Investments Australia website, third-party product pages, unitholder notices and on the Australian Securities Exchange website. Hard copies of the PDS were also available on request from the manager.
“Greenwashing is not limited to environmental claims, but extends to misleading ethical propositions. Entities which seek to promote ethical investing must ensure their statements are accurate and able to be substantiated,” ASIC deputy chair Sarah Cook said.
Investors can feel strongly about not investing in tobacco production, manufacturing and sales, and where tobacco-exclusion investments are promoted, the entity making those claims must be able to substantiate the full exclusion of those investments.”
In compliance with the infringement notices issued by the regulator, Vanguard Investments Australia paid a penalty of $39,960 on 1 December.
ASIC pointed out the payment of this fine should not be interpreted as an admission of guilt or liability.
