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Australian investment manager fined over greenwashing
Vanguard investment screen excludes cigarette manufacturers but not firms selling tobacco products
Tom King 5 Dec 2022

The Australian Securities and Investments Commission (ASIC) has fined investment manager Vanguard Investments Australia for alleged greenwashing activity.

Vanguard paid A$39,960 (US$27,000) in compliance with three infringement notices on December 1 2022. The payment is not an admission of guilt or liability.

The regulator was concerned that the product disclosure statements for the Vanguard International Shares Select Exclusions Index Funds, also known as Vanguard Funds, may have been liable for misleading the public by overstating an exclusion, otherwise known as an investment screen, claimed to prevent investment in companies involved in significant tobacco sales.

Commenting on the action, ASIC deputy chair Sarah Court says: “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.”

The Vanguard Funds were structured to exclude certain investments in tobacco. However, while the screen applied to exclude manufacturers of cigarettes and other tobacco products, it did not exclude companies involved in the sale of tobacco products.

“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 added.

Enforcement action against greenwashing is a current ASIC priority. Greenwashing is the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.

The action by the corporate regulator against Vanguard is the second greenwashing charge ASIC has issued this year.

In October Tlou Energy, which is listed on the Australian stock exchange and is developing power projects in parts of Africa, was the first company to be hit with compliance action on greenwashing. The firm was slapped with four infringement notices over allegedly misleading sustainability-related statements.

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