No smoking: Vanguard pays $40k fine for greenwashing

The corporate regulator handed a $39,960 infringement notice to Vanguard Australia after mislabelling the ESG exclusions for one of its funds.

The infringement relates to the Vanguard International Shares Select Exclusions Index Fund, which also includes two additional hedged versions for the Australian and New Zealand dollar.

The Vanguard funds are structured to exclude certain investments in tobacco but not exclude companies involved in the sale of tobacco products.

In a statement, Vanguard said it identified an inadvertent error in the PDS in the International Shares Select Exclusions Index Funds and self-reported the error to ASIC.

“The error was the same for each of the three funds affected and arose from an unintended misdescription in the PDS of the exclusionary screens applied to the underlying investments in these funds,” the statement said. “The relevant webpages and fact sheets were accurate in describing the exclusionary screens.”

The Vanguard spokesperson said the PDS issue was “promptly addressed” after it was identified and that ASIC has not suggested to them the error was nothing other than inadvertent.

“The error in the product disclosure statements did not result in any adverse financial impact on investors, and at no time would any of the three funds have held different securities if it had tracked the misdescribed index,” the spokesperson said.

More than the environment

ASIC deputy chair Sarah Court highlighted this incident shows that greenwashing is about more than misleading environmental claims.

“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,” Court said in a media release on Friday morning.

Although this incident was self-reported, ASIC has been urging investors to call out greenwashing which has become a priority area of enforcement for the regulator.

The regulator noted that payment of an infringement notice is not an admission of guilt or liability.

ASIC’s first action against greenwashing was in October against listed energy company Tlou Energy which paid $53,280 in infringement notices.