GRT Alert – Focus on Greenwashing results in Record Penalties

On 25 September 2024, the Federal Court made its biggest statement on environmental and sustainability obligations by handing down a $12.9 million penalty to Vanguard Investments Australia. The judgment has been a consequence of a conscious effort from ASIC to pursue ‘greenwashing’ as a priority in recent times. This focus has included the successful pursuit of Mercer Super – ASIC’s first greenwashing case brought before the Federal Court in August – resulting in a then-record $11.3 million penalty.

Following the Vanguard decision, ASIC stated that ‘This is an important decision, and the penalty imposed is the highest yet for greenwashing conduct. Greenwashing is a serious threat to the integrity of the Australian financial system and remains an enforcement priority for ASIC”.

As the business world looks to invest in the future with concerns over environmental impacts being of paramount concern, Vanguard was found to have provided false claims relating to their Environment, Social and Governance (ESG) screening practices. Vanguard claimed that their Fund in question had excluded a range of industries (including those associated with fossil fuels), but later admitted they had not properly researched or screened it against applicable ESG criteria.

Vanguard failed to fulfil their screening obligations and misled investors on the ethical characteristics of the fund through their claims that were publicly communicated through a variety of public mediums – including a presentation at a Fund Manager Event. Justice O’Bryan explained that with the market demand for investment funds adhering to these ethical characteristics, Vanguard had benefitted from its misleading conduct by enhancing their “reputation as a provider of investment funds with ESG characteristics”.

Given the recent push and its success ASIC has had in pursuing members of the financial services industry for their failure to uphold certain ESG requirements, we can expect to see more of these deterrent penalties in the future.

If you would like any advice on this or any other update, please contact Glenn Vassallo (gv@grtlawyers.com or 0422 857 760), Scott Standen (scott.standen@grtlawyers.com or 0447 790 009) or Ashley Hill (ashley.hill@grtlawyers.com or 0415 150 866).

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Advising Cerro Resources Limited in relation to its public market merger and acquisition deal with Canadian based Primero Gold Limited and the concurrent spin out of assets to Santana Metals Limited and listing of Santana Metals Limited on ASX
Advising Discovery Metals Limited in relation to its A$250 million debt restructuring and associated equity raisings and proposed convertible note issue
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ASX listing of Apiam Animal Health Limited, vertically integrated provider of services and product to agricultural industry and
ASX listing of P2P Transport Limited.

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