As ESG-related litigation has developed, one definitive trend has been the emergence of litigation involving allegations of “greenwashing” – that is, claims alleging that companies overstated their ESG credentials in order to win business, attract customers, or score virtue points. To date, the greenwashing claims have emerged primarily in the U.S. and Europe. Now, Australia is getting into the act, as the Australian Securities and Investments Commission (ASIC) has brought and won its first greenwashing civil penalty action. As discussed below, the action involved claims that Vanguard’s Australian affiliate made misleading statements about its ESG-sorting processes for one of its index funds.

ASIC’s March 28, 2024, press release about the civil action can be found here. The Federal Court of Australia’s March 28, 2024, judgment can be found here. (Hat tip to Persia Navidi of the Hickson Lawyers law firm for her March 28, 2024 LinkedIn post about the ASIC action.)

The ASIC action involved Vanguard Investments Australia Ltd., and specifically one of its index funds, the Vanguard Ethically Conscious Global Aggregate Bond Index Fund. As of February 26, 2024, the fund had assets under management of over AUD $1 billion. The fund is a registered management investment scheme, of which Vanguard is the “Responsibility Entity” and the “Investment Manager,” within the meaning of applicable law and regulation.

Investments in the fund were based on an index called the Bloomberg Barclays MSCI Global Aggregate SRI Exclusions Float Adjusted Index (the “Index”). In its action against Vanguard, ASIC alleged that between August 2018 and February 2021 and in a range of communications (including press releases, disclosure statements, and media reports), and in violation of the Australian Securities and Investment Commission Act 2001, Vanguard made false and misleading representations about the ESG exclusionary screens that were applied to the fund and that the fund included securities of issuers that violated applicable ESG criteria.  

In a March 8, 2024, court hearing, Vanguard admitted that a significant portion of securities in the Index and thus in the fund were from issuers that were not researched or screened against applicable ESG criteria.

In his March 28, 2024, Order, Australian Federal Court Justice Michael O’Bryan held that Vanguard had “engaged in conduct in relation to financial services that was liable to mislead the public as to the nature, the characteristics, and the suitability for their purpose of those financial services,” and thereby “contravened” applicable provisions of the ASIC Act.

The penalties to be imposed will be determined at a hearing scheduled to take place on August 1, 2024.


ASIC’s press release about the court’s determination states that the outcome represents the agency’s “first greenwashing civil penalty action.” The press release quotes an ASIC spokesperson as emphasizing that Vanguard, “by its own admission” had “misled investors” numerous times. The press release also quotes the spokesperson as saying that as the first greenwashing court outcome, the case “shows our commitment to taking on misleading marketing and greenwashing claims” and “sends a strong message to companies making sustainable investment claims that they need to reflect the true position.”

Reading between the lines a little bit about Vanguard’s admissions, I wonder if what is happening here is that Vanguard and its fund are taking the fall for the limitations of the Bloomberg Barclays Index on which the fund’s investments were based; that is, was it Vanguard itself, or was it the Index on which the Vanguard fund was based, that had failed to sort the investments against the ESG exclusionary screens. ASIC would of course say that in either case, it is Vanguard’s responsibility to ensure that its own statements accurately reflected the actual way that the investments in the fund were sorted, regardless of whether or not the failure to screen was the fault of the underlying index.

What is of interest to me about this that this civil action was filed and pursued by the Australian securities regulator, in Australian courts, under Australian law. Though the action is thoroughly Australian, it replicates the kinds of claims that regulators and investor plaintiffs have pursued in the U.S. and Europe. It is also another example of the fact that by and large the ESG-related claims that have emerged have not involved companies that were ESG laggards, but rather have been brought against companies that have tried to present themselves as proactive on ESG.

The emergence and evolution of these kinds of “greenwashing” claims should be of interest to anyone concerned about what kinds of AI-related claims was may see. Just as the ESG-related claims have to a significant extent involved these kinds of greenwashing claims, the AI-related claims that have emerged so far have involved a very close corollary to greenwashing – that is, what SEC Chair Gary Gensler called “AI washing,” which is the alleged effort by some firms to portray themselves or their products or services as AI-enabled, in order to burnish their AI credentials at a time when AI is of keen interest to investors. The comparison between the company actions involved certainly seems to hold at a certain level. The likelihood is that, just as we have seen greenwashing claims develop and spread, we will see AI washing claims develop and spread as well.

Speaking of ESG-Related Governmental Actions: Readers may be interested to know that the Mississippi Secretary of State Michael Watson has taken action against Blackrock for its non-ESG funds, issuing a cease and desist order because, he alleges, while the investment firm marketed the funds as non-ESG, the firm had separately committed to use all of its assets under to management to “advance the environmental agenda of reducing carbon emissions to ‘net zero.’” A copy of the March 26, 2024 Cease and Desist Order against Blackrock issued by the Office of the Secretary of State can be found here.

According to a March 27, 2024, Law360 article about the Order (here), Watson said in a statement that “Investment Companies will not push their political agenda on Mississippians, especially through fraudulent and deceptive means.”

The Law360 article quotes Blackrock as saying that many policymakers and government officials “have ideas about how we should invest our clients’ money,” but that “We are always bound to invest consistent with our clients’ choices, their best financial interest, and applicable law. Our only agenda is maximizing risk-adjusted returns for the funds our clients choose to invest in.”

The contrast between the Mississippi action and the action of the Australian regulator is interesting. Not only did the Australian regulator go through the courts and pursue its case upon the factual record (including admissions by the defendant) but the Australian action also was directly based on the defendant’s statements about the funds. The Mississippi action is not based on anything that Blackrock said about the non-ESG funds that are the basis of the state’s action, but rather it is based on the Secretary of State’s version of general statements about Blackrock’s ESG-related views.

Blackrock is now the favorite punching bag for a certain type of U.S. politician. The Law360 article refers to actions taken by a number of other state politicians along the same line as Mississippi’s. Certain politicians apparently believe that they can gain political points by attacking an investment firm for positions with which the politicians disagree.