New Zealand regulator warns Vanguard over greenwashing

New Zealand's financial markets regulator issued a warning to U.S. fund giant Vanguard Group on Wednesday for failing to disclose details within the required time over infringement notices filed against it in Australia for alleged greenwashing.

ASIC fined the world's biggest mutual fund manager last year for misleading investors by overstating an exclusion, also known as an investment screen, which is used to prevent investment in companies involved in significant tobacco sales.

Vanguard, which has around A $110 billion $74 billion in assets in Australia and New Zealand, said at the time that one of its disclosure documents was mislabelled and that the error was corrected promptly.

The funds were also offered to New Zealand investors via a mutual recognition scheme, but Vanguard missed the deadline by nearly two months to notify the Financial Markets Authority FMA about the action by ASIC, Australia's securities regulator.

A spokesman for Vanguard Australia said in an emailed response that the company regrets our oversight in failing to comply with our notification obligations to the Financial Markets Authority of New Zealand.

Environmental groups and regulators in Australia and elsewhere are taking action for greenwashing, which is misrepresenting the extent to which an investment or financial product is sustainable and eco-friendly.

FMA said that Vanguard failed to identify its obligations and did not have adequate processes in place to ensure that it filed the required notice within the required period.

It said that the breach by Vanguard could harm the integrity of an agreement between Australia and New Zealand over market offerings.

Australia and New Zealand have a mutual agreement that would allow issuers of Australian financial products to operate in New Zealand and a New Zealand issuer to extend an offer that is registered there into Australia.

It is important that issuers taking advantage of the regime understand and attend to their obligations. A formal public warning was appropriate, said Paul Gregory, FMA executive director of regulatory response.