ESG round-up: ASIC launches greenwashing case against Vanguard

The Australian Securities and Investments Commission (ASIC) has lodged civil penalty proceedings in the Federal Court against Vanguard Investments Australia for allegedly making “false and misleading” statements in relation to certain ESG exclusionary screens applied to investments in a Vanguard fund. ASIC said this could have led investors to think that all securities in its Ethically Conscious Global Aggregate Bond Index Fund had been screened against certain ESG criteria. ASIC deputy chair Sarah Court said: “We consider that the screening and research undertaken on behalf of Vanguard was far more limited than that being promised to investors, and we consider this constitutes another example of greenwashing.”

In response to this, Vanguard said it self-reported a breach to the ASIC, having identified that the descriptions of the exclusionary screens published by the index provider and within its product disclosure statement “were not sufficiently detailed”. It added that there was “never any intention to mislead”. ASIC has issued more than $140,000 in infringement notices in response to concerns about alleged greenwashing, including three infringement notices totalling $39,960 against Vanguard for separate greenwashing conduct. The regulator is seeking declarations and pecuniary penalties from the court.

The International Organisation of Securities Commissions (IOSCO) has announced its endorsement of the International Sustainability Standards Board’s (ISSB) recently issued standards on sustainability disclosure and climate-related disclosures. According to a statement, the global regulatory body determined the pair are “appropriate to serve as a global framework for capital markets to develop the use of sustainability-related financial information in both capital raising and trading and for the purpose of helping globally integrated financial markets accurately assess relevant sustainability risks and opportunities”.

IOSCO is now calling on its 130 member jurisdictions to consider ways in which they might adopt, apply or otherwise be informed by the ISSB standards within the context of their jurisdictional arrangements, “in a way that promotes consistent and comparable climate-related and other sustainability-related disclosures for investors”.

In other ISSB news, the International Financial Reporting Standards (IFRS) has published a comparison of its IFRS S2 climate-related disclosures standard and the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations. This follows the announcement earlier this month that the IFRS would take over TCFD monitoring from next year once the International Sustainability Standards Board’s (ISSB) standards come into force. The requirements in IFRS S2 are consistent with the four core recommendations and 11 recommended disclosures published by the TCFD, said the IFRS. Companies that apply the ISSB standards will meet the TCFD recommendations and so do not need to apply the TCFD recommendations in addition to the ISSB standards, it added. Additional reporting measures in IFRS S2 include the requirements for companies to disclose industry-based metrics, to disclose information about their planned use of carbon credits to achieve their net emissions targets, and to disclose additional information about their financed emissions.

Morningstar has analysed the voting patterns of the biggest 10 asset managers on 102 ESG resolutions in the 2022 proxy year, finding significant differences in the ways managers vote. The analysis showed that while Invesco and Franklin Templeton supported most of the resolutions, Vanguard, T Rowe Price and Dimensional opposed the majority. Capital Group was another manager that showed higher support for key resolutions than others, but voted on few of them due to owning fewer of the companies than other managers. BlackRock, Fidelity and JPMorgan all fell somewhere in the middle in terms of supporting and opposing resolutions, with State Street abstaining far more than the other managers.

The European Banking Authority has launched a public consultation on draft templates for collecting climate-related data from EU banks. This is part of the one-off ‘Fit for 55’ climate risk scenario analysis, which the EBA will carry out together with the other European Supervisory Authorities (ESAs) and with the support of the European Central Bank (ECB) and the European Systemic Risk Board (ESRB). The draft templates are designed to collect climate-related and financial information on credit risk, market and real estate risks. Following the consultation – which closes on 11 October – the EBA will launch a data collection at the end of November with the support of other authorities. Seventy banks will take part in this exercise, the same banks as those included in the 2023 EU-wide stress test. The one-off ‘Fit-for-55’ climate risk scenario analysis is expected to start by the end of 2023, with results expected to be published in early 2025.

The Australian Prudential Regulation Authority (APRA) has published its final guidance on investment governance for superannuation trustees. The release is the latest step in a two-year process of consultation and reform by APRA to strengthen investment governance practices across the superannuation industry. The guidance is designed to support trustees in meeting their obligations under the prudential standard on investment governance, which came into force at the start of this year. It covers guidance on liquidity management, stress testing and asset valuations, as well as an outline of how the regulator expects trustees to consider ESG risk factors as part of their overall risk management.

The UK Court of Appeal has dismissed an appeal by two members of the Universities Superannuation Scheme (USS) who tried to bring claims against the pension fund’s current and former directors for failing to design a credible transition plan to move investments out of fossil fuels. Judge Sarah Asplin said that the claim was “bound to fail” since there was no evidence to suggest USS has exercised its influence in an “improper fashion”, and that the members had no grounds to challenge the pension fund’s management and investment decision.

Climate law firm ClientEarth will appeal the dismissal in the High Court of its lawsuit against Shell’s board of directors over climate risk mismanagement. The case was originally dismissed in May, and ClientEarth subsequently asked the judge to reconsider. However, in a judgement on Monday, the judge maintained his decision. ClientEarth said it will now request permission to appeal.

The winner of the inaugural Insight Investment University of Oxford Prize for Greening Finance were announced at the Oxford Sustainable Finance Summit last week. Mary Schapiro, vice chair of the Glasgow Financial Alliance for Net Zero (GFANZ), chair of the Climate Data Steering Committee, and former chair of the US Securities and Exchange Commission (SEC), was awarded the prize for outstanding service to green finance. The judging panel highlighted her leadership on establishing a global architecture for sustainability reporting, including her development of the TCFD and the Sustainability Accounting Standards Board (SASB), which have become two key pillars of the ISSB.

The winner of the outstanding research category was Caroline Flammer, professor of international and public affairs and of climate at Columbia University. The judges commended her articles, which have had wide impacts on sustainable investment and ESG, including the impact of corporate green bonds, CSR and financial performance, and shareholder responses to sustainability.

The Diversity Project is due to launch a European arm this autumn to encourage a more inclusive asset management industry across the continent. The cross-border initiative has been spearheaded by industry veteran Ric van Weelden in partnership with eight founding member firms: Aegon Asset Management, AXA Investment Managers, Franklin Templeton, HSBC Global Asset Management, Nordea Asset Management, Pictet Asset Management, Quoniam Asset Management and T Rowe Price. Building on the UK Diversity Project, it will focus initially on Europe’s key asset management markets and three themes, gender equality, social mobility and inclusive culture. The project will set up workstreams around these three themes and commissioning research to understand the current state of play around diversity and inclusion in the European asset management industry.