ASIC sues Vanguard Australia over alleged ESG fund greenwashing
The Australian Securities and Investments Commission launched Federal Court proceedings against Vanguard Investments Australia over alleged misleading ESG screening claims for its Ethically Conscious Global Aggregate Bond Index Fund. The case underscores enforcement risk around ESG fund disclosures, directly relevant as SEBI tightens greenwashing rules for Indian ESG mutual funds.
Announced via an ASIC press release on July 25, 2023, the regulator launched civil penalty proceedings in the Federal Court against Vanguard Investments Australia over alleged misleading conduct regarding ESG exclusionary screens on its Ethically Conscious Global Aggregate Bond Index Fund (Hedged). ASIC alleges Vanguard misled investors into believing all securities were ESG-screened. The fund tracked the Bloomberg Barclays MSCI Global Aggregate SRI Exclusions Float Adjusted Index, which Vanguard claimed excluded issuers in industries such as fossil fuels.
The case affects asset managers, fund issuers, and ESG product marketers across multiple disclosure channels. ASIC alleges Vanguard failed to conduct comprehensive ESG research on a significant portion of issuers; as of February 2021, 42 issuers in the Index and at least 14 in the Fund violated the applicable ESG criteria, collectively issuing hundreds of bonds exposing investors to fossil-fuel-linked industries. Deputy Chair Sarah Court cited unreliable screens as greenwashing, spanning Product Disclosure Statements, a media release, the website, and recorded events.
Fund managers should ensure ESG screening and research substantiate every marketing claim across all platforms, since ASIC previously issued Vanguard infringement notices totalling over $140,000 for separate greenwashing. The current case seeks declarations, pecuniary penalties, and orders to publicise contraventions; Vanguard's first case management hearing was yet to be scheduled. Indian AMCs should align ESG disclosures with actual portfolio screening to avoid comparable enforcement under SEBI's anti-greenwashing requirements.
Key figure — Prior penalties: over $140,000 in infringement notices issued to Vanguard
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