In a statement last week, ASIC said it 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, otherwise known as an investment screen, that claimed to prevent investment in companies involved in significant tobacco sales.
“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,” said ASIC deputy chair Sarah Court.
In a statement emailed to InvestorDaily, Vanguard said the error did not adversely impact any investors and was self-reported to the corporate regulator.
“Earlier this year, Vanguard identified an inadvertent error in the product disclosure statements for its Vanguard International Shares Select Exclusions Index Funds. Vanguard self-reported the error to ASIC, consistent with its statutory obligations, and issued a supplementary product disclosure statement for each affected fund correcting the error,” the statement said.
“The error was the same for each of the three funds affected and arose from an unintended misdescription in the PDS of the exclusionary screens applied to the underlying investments in these funds. The relevant web pages and fact sheets were accurate in describing the exclusionary screens.
“The PDS issue was promptly addressed by Vanguard shortly after it was identified. The error in the product disclosure statements did not result in any adverse financial impact on investors, and at no time would any of the three funds have held different securities if it had tracked the misdescribed index.
“Vanguard has acknowledged the error and fully co-operated with ASIC in relation to this matter. Importantly, ASIC has at no stage suggested that the error arose otherwise than inadvertently.”
According to ASIC, 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,” Ms Court said.
Vanguard paid $39,960 in compliance with the infringement notices on 1 December 2022. ASIC reminded that “payment of an infringement notice is not an admission of guilt or liability”.
