ASIC has taken legal action against Vanguard Investments, accusing the investment manager of allegedly misleading conduct relating to ESG claims of one of its fixed income products.
The regulator has lodged proceedings in the Federal Court alleging false and misleading statements regarding the the Vanguard Ethically Conscious Global Aggregate Bond Index Fund (Hedged), which was marketed to investors who wanted investments screened for ethical considerations.
Vanguard claimed that all securities in the fund were screened against specific ESG criteria, including excluding companies involved in fossil fuels.
ASIC, however, alleges that Vanguard did not conduct sufficient research on a significant portion of the bond issuers in the fund’s underlying index, the Bloomberg Barclays MSCI Global Aggregate SRI Exclusions Float Adjusted Index.
As of February 2021, the index and the fund contained issuers that did not meet the ESG criteria, including those connected to fossil fuel-related activities, ASIC alleges.
The allegedly misleading information appeared in Vanguard’s product disclosure statements, media releases, website statements and interviews. ASIC has already issued infringement notices totalling $39,960 against Vanguard for other alleged instances of greenwashing.
Vanguard self-reported the breach to ASIC and implemented measures to strengthen its disclosure processes, emphasising its commitment to serving clients’ ESG investing needs, ASIC acknowledged.
In a statement, Vanguard explained there was never any intention to mislead clients but admitted it has not lived up to the “high standards” it holds itself accountable to.
The investment management company apologised for the concern this matter may have caused for its clients.
The first case management hearing is yet to be scheduled.