Highlights

• Vanguard fined $12.9 million for greenwashing.
• Federal Court found Vanguard Investments Australia breached consumer law by making false claims about ethical exclusions in one of its index funds.
• Vanguard must pay costs and notify consumers of misleading conduct and court decisions.

Vanguard has been ordered to pay $12.9 million after admitting to misleading investors in a landmark greenwashing case.

On Wednesday, Justice Michael O’Bryan ordered Vanguard to pay the fine and notify consumers of the court’s decision and Vanguard’s conduct.

In addition to the fine, Vanguard must pay the costs of the Australian Securities and Investments Commission (ASIC) which brought the case after Vanguard self-reported the issue.

Justice O’Bryan had previously found that Vanguard breached the ASIC Act multiple times by making false statements about the environmental, social and governance (ESG) screens applied to the Vanguard Ethically Conscious Global Aggregate Bond Index Fund.

“Vanguard benefited from this conduct,” Justice O’Bryan said. “The false claims increased Vanguard’s appeal to investors looking for ESG funds and enhanced its reputation as a provider of those products.”

The fund in question excluded companies involved in fossil fuels, alcohol, tobacco, gambling, military weapons, nuclear power and adult entertainment. However, the court found some companies, like the Abu Dhabi Crude Oil Pipeline, were still included due to screening limitations.

ASIC had sought $21.6 million in penalties, which Vanguard’s lawyers argued in an August hearing would eat up most, if not all, of the company’s net annual profit.

Vanguard’s profits were between $10 million and $50 million annually.

ASIC’s barrister, Meg O’Sullivan KC, said Vanguard staff were aware of the problems with the ethical screens but did nothing to fix them.

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Source: The New Daily