ESG Enforcement Tracker

Key facts:

In November 2023, ASIC issued two infringement notices against Morningstar for exposing the Morningstar International Shares (Unhedged) Fund (the Fund) to controversial weapons investments, contrary to its Environmental, Social and Corporate Governance Policy (ESG Policy).  

In September 2022, Morningstar issued a Product Disclosure Statement (PDS) for the Fund. The PDS incorporated Morningstar’s ESG Policy, which stated that the Fund would not have exposure to stocks that have “controversial weapons exposure as determined by Sustainalytics”, subject to limited exclusions.

In November 2022, Morningstar acquired securities in Honeywell International Inc for the Fund. In May 2023, the Fund was exposed to securities in General Dynamics Corp, Leidos Holdings In, Northrop Grumman Corp and Raytheon Technologies Corp. Although the investments were divested within a month, ASIC held that the PDS was liable to mislead because Morningstar had acquired securities, for the Fund, in five companies which Sustainalytics recognised as being involved in controversial weapons. The involvement of the five companies ranged from producing core components for nuclear weapons to research and development activities for nuclear-capable missiles.

Morningstar paid AUD$29,820 on 30 November 2023 to comply with the infringement notices.