The Australian Securities and Investments Commission (ASIC) has won a civil penalty lawsuit against Vanguard for greenwashing.

The Federal Court found that Australian Vanguard Investments breached the law due to misleading statements regarding certain Environmental, Social, and Governance (ESG) exclusion screens in Vanguard index funds.

During a hearing on March 8, 2024, before Judge O'Brian, Vanguard admitted to engaging in potentially misleading conduct and acknowledged that its statements were false or misleading. On March 28, 2024, Judge O'Brian ruled that Vanguard had repeatedly breached ASIC laws due to false or misleading statements regarding the ESG exclusion screens in Vanguard Ethically Conscious Global Aggregate Bond Index Fund.

These statements were disseminated to the public through a series of communications, including:

• 12 product disclosure statements
• A media press release
• Statements published on the Vanguard website
• A financial news network interview on YouTube
• A financial news network fund manager event speech published online

The fund's investments are based on the Bloomberg Barclays MSCI Global Socially Responsible Exclusion Float Adjusted Index. Vanguard claimed that the index only excludes companies engaged in significant business activities in a range of industries, including those involving fossil fuels. However, it has acknowledged that a significant portion of the securities in the index and the fund come from issuers that have not been researched or screened for compliance with applicable ESG standards.

This matter has been scheduled for further hearing on August 1, 2024, during which the court will consider appropriate penalties for the conduct.