New Zealand’s financial markets regulator has reprimanded US fund giant, Vanguard Group, for failing to disclose information about infringement notices in Australia for alleged greenwashing within the specified time frame.
Last year, the Australian Securities and Investment Commission (ASIC) imposed a fine on the world’s largest mutual fund manager for providing misleading information to investors by exaggerating an exclusion, also referred to as an ‘investment screen’. The exclusion was alleged to prevent investment in companies engaged in significant tobacco sales.
With assets worth around A$110 billion (£60 billion) in Australia and New Zealand, Vanguard acknowledged that one of its disclosure documents was mislabelled and corrected the error promptly.
The same funds were also available to New Zealand investors; however, Vanguard failed to meet the deadline to notify the countries Financial Markets Authority (FMA) about the ASIC’s regulatory action by almost two months, as per its statement.
“Vanguard Australia regrets our oversight in failing to comply with our notification obligations to the Financial Markets Authority of New Zealand,” a spokesperson said in a response.
Vanguard is not the first fund to face criticism or claims of greenwashing related to ESG investing. As demand for ESG investing has increased, so has the number of funds offering ESG options. This has led to increased scrutiny from investors, regulators, and media. Other funds and investment firms have also faced criticism and scrutiny for their ESG practices.
Environmental groups and regulators across Australia and other countries are taking stronger measures against greenwashing, a practice that involves misrepresenting the extent to which an investment or financial product is sustainable and environmentally friendly.
The FMA in New Zealand issued a statement stating that Vanguard had failed to recognise its responsibilities and did not have appropriate procedures in place to ensure timely notification. The FMA further cautioned that if Vanguard’s violation is not rectified, it could damage the credibility of the market offerings agreement between Australia and New Zealand.
The two countries have an agreement in place that allows Australian financial product issuers to operate in New Zealand, and New Zealand issuers to extend their registered offers into Australia.
“It is important that issuers taking advantage of the regime understand and attend to their obligations. In this case a formal, public warning was appropriate,” said Paul Gregory, FMA executive director of regulatory response.
In December, Vanguard Group pulled out of an investment-industry initiative on tackling climate change, citing reasons like wanting to demonstrate independence and clarify its views for investors. This decision prompted a significant amount of backlash from stakeholders and climate groups alike.
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