The alternatives sector is unique in that it’s largely defined by what it’s not. Accordingly, how you fit alternatives within your existing asset class structure will depend on relativity, and how the investments interact with the other asset classes according to Atchison’s Kev Toohey.
The private markets juggernaut is one that has also thrown up a wealth of data that other players can use to sharpen up due diligence when making their own investment decisions – especially in the growing secondaries market.
ASIC hits Vanguard funds over ‘greenwashing’ tobacco claims
Vanguard Investments Australia has paid nearly $40,000 in penalties for allegedly overstating an investment screen meant to exclude tobacco companies from three of its funds, marking the Australian Securities and Investments Commission’s second infringement action against a financial company over greenwashing concerns.
ASIC sent the company – a unit of global investment manager Vanguard Group – infringement notices on November 11 over representations in product disclosure statements for the Vanguard International Shares Select Exclusions Index Fund, as well as Australian- and New Zealand-dollar-hedged versions of the fund. Vanguard structured the funds to track a Morgan Stanley index that excludes tobacco and controversial-weapons investments.
The Vanguard funds purported to “exclude securities involved in the production, manufacturing or significant sales of tobacco,” but the underlying index excludes only securities involved in tobacco product manufacturing and does not prevent investment in companies involved in the sale of tobacco products, the regulator said. The screening claim was thus “liable to mislead the public” by overstating the tobacco exclusion, it said.
“Greenwashing is not limited to environmental claims but extends to misleading ethical propositions,” ASIC Deputy Chair Sarah Court said in a statement announcing the infringement notices.
“Entities which seek to promote ethical investing must ensure their statements are accurate and able to be substantiated,” she added. “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.”
Vanguard paid $39,960 in compliance with the infringement notices on December 1, ASIC said, noting that payment of an infringement notice is not an admission of guilt or liability. Vanguard has said the infringement was an inadvertent error and noted that it self-reported to ASIC. The product disclosure statements included the alleged misrepresentations from 2016 through May 18, 2022.
Stepped-up enforcement
Greenwashing – misrepresenting the environmentally friendly, sustainable or ethical credentials of a financial product or investment strategy – is a current enforcement priority for ASIC, the regulator said. In June, it published Information Sheet 271, titled “How to avoid greenwashing when offering or promoting sustainability-related products,” for responsible entities of managed funds and superannuation fund trustees.
The Vanguard action is the second greenwashing enforcement action ASIC has brought. In October, Tlou Energy paid more than $53,000 to comply with four infringement notices citing false or misleading sustainability-related statements made in October 2021 to the Australian Securities Exchange. According to ASIC, Tlou had misrepresented that electricity it produced would be carbon-neutral, that it had environmental approval and the capability to generate electricity from solar power, and that its gas-to-power project would be low-emission.
“As entities promote sustainability and green practices as part of their value proposition, they must ensure they can support those statements and have a reasonable basis for doing so,” Court said in announcing the penalties against Tlou, adding that ASIC urged “companies and their advisers to ensure their communication to stakeholders, members and the broader market is accurate and has a reasonable basis”.
She noted then that ASIC was investigating numerous listed entities, managed funds and super funds over their claimed green credentials. “Companies are on notice that ASIC is actively monitoring the market for potential greenwashing and will take enforcement action, including court action, for serious breaches.”
