FMA aware of ASIC enforcement on Vanguard

The Financial Markets Authority is aware of ASICs enforcement on an Australian fund available in New Zealand but doesn't plan to do anything.

Wednesday, December 7th 2022, 8:42AM

The Australian Securities and Investments Commission (ASIC) has taken action against greenwashing for the second time. Last week it issued three infringement notices to investment manager Vanguard Investments Australia related to claims about the exclusion of tobacco.

The same fund is available in New Zealand through the DIY investment platform InvestNow, and New Zealand’s financial regulatory body the Financial Markets Authority (FMA) says it is aware of ASIC’s enforcement action and has no further comment at this stage.

Enforcement action against greenwashing is a current priority of ASIC. In October it issued infringement notices against Tlou Energy which paid A$53,280. On this side of the Tasman, the FMA has also flagged greenwashing as an area of major concern, declaring on its website that “it’s illegal to mislead or confuse investors by suggesting or omitting certain information. The FMA can take action to stop or prevent this behaviour. Contact us if you think a company is ‘green-washing’ and can’t back up their claims.” It has yet to take action against any party.

In the Vanguard case, the ASIC was concerned that Product Disclosure Statements for the Vanguard International Shares Select Exclusions Index Funds (the Vanguard Funds) may have been liable to mislead the public by overstating an exclusion of companies involved in significant tobacco sales.

ASIC Deputy Chair Sarah Court said 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 this 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.”
Barry Coates of the RI guidance website Mindful Money says it’s helpful to see that the Australian regulator is holding Vanguard to account. “As the FMA has said previously, funds need to do what it says on the tin.

“If their policy lists exclusions, they should actually exclude those investments. That is one of the reasons we set up Mindful Money. Investors can look at what any KiwiSaver or retail investment fund is actually investing in, not just their policy. We make this information available for free to all investors. Transparency is the best antidote to greenwashing.”

Tags: ASIC