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ASIC makes its second ESG-based prosecution this year; fines Vanguard $40K for misadvertising ethical stance on tobacco

Fri 02 Dec 22, 2:43pm (AEST)
A judge's gavel sits on a desk next to a pen. In the background, a pile of notebooks is visible, and a miniature set of golden scales
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Key Points

  • ASIC has filed its second greenwashing prosecution of the year, this time coming for none other than Vanguard
  • Market regulator issued a press release outlining prosecution action today, noting payment of a $40K fine is not evidence of criminality
  • ASIC earlier this year came for Tlou Energy based on misadvertisements of its emissions profile

Australian market regulator Australian Securities & Investments Commission (ASIC) has today filed its second ESG-based prosecution of the year, going after none other than Vanguard for misadvertisements of its ethical investment strategy. 

Vanguard has been fined $40k for claiming it did not invest in tobacco-related companies through a managed Environmental, Social and Governance (ESG) fund, despite the fact it continues to give money to companies who sell tobacco products. 

Manufacturers and producers of tobacco were excluded, but, ASIC found that the company failed to divulge its ethically-minded fund still invested in companies profiting from sales of tobacco. 

ASIC sending a signal 

While $40k is fairly insignificant for Vanguard, the move is perhaps more notable for its symbolism, rather than the actual penalty itself. 

ASIC came for Tlou Energy (ASX:TOU) earlier this year for claims the company made on its emissions profile which were found to be false. 

Called “greenwashing,” the move was ASIC’s first penalty given to a company for misadvertising the environmental profile of its operations. 

ASIC’s prosecution of Vanguard today is technically another greenwashing prosecution, though, not necessarily related to environmental objectives, rather, human health outcomes. 

Greenwashing not just environmental 

"Greenwashing is not limited to environmental claims but extends to misleading ethical propositions." ASIC deputy chief Sarah Court said. 

"Investors can feel strongly about not investing in tobacco production...and where tobacco-exclusion investments are promoted, the entity making those claims must be able to substantiate the full exclusion of those investments."

The market watchdog ultimately found that Vanguard was “liable” to mislead the public with its failure to disclose ongoing investments in tobacco retailers, but, stopped short of actually accusing the company of criminal activity. 

Of course, the issuance of a fine speaks for itself. 


Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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