Sarah Court

ASIC has scored its first win in its anti-greenwashing campaign as the Federal Court ruled that Vanguard Australia made “misleading claims” in one of its investment products. The verdict comes as the federal government also puts a spotlight on greenwashing, tabling legislation climate risk reporting obligations for financial firms including super funds. 

The passive investing giant operates an APRA-regulated super fund and several retail investment products in Australia. The fund in trouble with ASIC was its ‘Ethically Conscious Global Aggregate Bond’ index fund.  

ASIC took legal action against Vanguard in 2023, alleging the latter made false and misleading statements in saying that all securities in the indexed fund were screened against certain ESG claims in its product disclosure statement, a media release, a media interview and an event presentation. 

However, ASIC claimed it found at least 14 issuers, that collectively issued at least 27 bonds in the fund, violated these criteria as of February 2021. These bonds exposed investors to holdings which had ties to fossil fuels, the regulator said.  

Vanguard declined to comment on details of ongoing legal matters. The case is listed for a further hearing on 1 August to consider the penalty.  

This adds to a string of actions taken by the corporate watchdog against super funds in the last 12 months, including Mercer, Future Super and Active Super.  

Vanguard also paid a nearly $40,000 fine after the fund manager reported it failed to exclude companies involved in the sale of tobacco products while having a tobacco-related negative screen in several products. 

At the Investment Magazine Chair Forum last month, ASIC deputy chair Sarah Court said it is a good thing that funds are committing to net zero goals. But she warned that funds failing to meet their own pledges are flirting with misleading conducts 

“We recognise that [the net zero pledge] is a forecast and it’s imprecise,” Court said. “All sorts of things can get in the way, so we’re not obtuse to these issues, and we’re genuinely not unreasonable people.” 

But she urged funds not to throw around descriptions like “carbon neutral”, “clean”, or “green” without reasonable ground just because it’s what the competitors are doing.