The Vanguard SOS campaign is currently running two advertisements on US television to target the Vanguard Group for its alleged “failure to mitigate financial risk stemming from climate change”.
“The new ads warn Vanguard’s customers and employees of the risk that climate change poses to their retirement futures – and criticises Vanguard for ignoring the outsized climate impact that investing in fossil fuels creates,” the international campaign stated.
According to Vanguard SOS, the asset management giant allegedly invested US$268 billion in fossil fuels in 2023 and US$93 billion in coal alone.
In addition, the campaigners claim that Vanguard remains “out of step” with the general public’s sentiment towards sustainability.
“Many of Vanguard’s own clients have demanded meaningful climate action, raising concerns about a breach of fiduciary duty,” it added.
“Vanguard describes itself as ‘owned’ by its investors, yet maintains an opaque management structure and does not hold regular shareholder meetings, giving investors little to no meaningful avenue to influence Vanguard’s decision-making.”
The campaign was first launched in 2022 to encourage Vanguard to engage in more sustainable investment. It describes itself as a global network of civil society organisations, social movements and financial experts.
Vanguard Australia’s website states that many of its active fund managers explicitly consider ESG factors in their investment process.
“We develop products that allow investors to avoid exposure to companies that are not aligned with their values, or to mitigate certain ESG risks,” it stated.
ASIC’s action against Vanguard’s alleged greenwashing
The global asset manager has previously received two ASIC notices regarding its ‘misleading’ ESG investment.
In July 2023, ASIC lodged civil penalty proceedings in the Federal Court against Vanguard Investments Australia. It alleged that Vanguard made false and misleading statements and engaged in conduct liable to mislead the public in representing that all securities in the Vanguard Ethically Conscious Global Aggregate Bond Index Fund (Hedged) (Fund) were screened against certain ESG criteria.
The fund was marketed to investors seeking, amongst other things, securities with an ethically conscious screen.
Investments held by the fund were based on an index called the Bloomberg MSCI Global Aggregate SRI Exclusions Float Adjusted Index which Vanguard claimed excluded issuers with significant business activities in a range of industries, including those involving fossil fuels.
However, ASIC alleged that ESG research was not conducted over a significant proportion of issuers of bonds in the index, and therefore the fund. Several of these bonds exposed investor funds to investments which had ties to fossil fuels, including those with activities linked to oil and gas exploration.
In a separate matter from December 2022, Vanguard received three infringement notices over alleged greenwashing, totalling $39,960. ASIC was concerned the product disclosure statements for the Vanguard International Shares Select Exclusion Index Fund might have been liable to misleading the public by overstating an exclusion, otherwise known as an investment screen, claiming to prevent investment in companies involved in significant tobacco sales.
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.
