High-profile investors, including Vanguard, face pressure from US Republican politicians for using ESG factors in their investments.
Vanguard Group Inc. is emerging as a leader in the fight against climate change, the top mutual fund manager has said, explaining that it wants to demonstrate its independence and highlight its ideas to investors.
High-end investors, including Vanguard of Pennsylvania, are facing increasing pressure from US Republican politicians for using environmental, social and governance (ESG) factors in the selection and management of securities.
One of the criticisms was the effort known as Net Zero Asset Managers (NZAM), which was launched at the end of 2020 to encourage financial institutions to meet their emission targets by 2050 and reduce the rise of global warming. As of November 9, NZAM counted 291 signatories representing $66 trillion in assets under management.
The exit of Vanguard, which manages about $ 7 trillion in assets, is a disruption to efforts to prepare the industry to move away from fossil fuels, although Vanguard insisted that “it will not affect our commitment to help our investors deal with the risks. that climate change can bring their benefits to long time “.
As recently as May, Vanguard announced its commitment to NZAM’s goals. On Wednesday, Vanguard wrote on its website that efforts by companies like NZAM could cause confusion.
“We have decided to leave NZAM so that we can better communicate what investors want in terms of financial services and how we think about physical risks, including climate-related risks – and ensure that Vanguard speaks independently on the political value of our investors,” Vanguard said in a statement. .
Vanguard, which was kept nearby, did not make management available for comment. But his comments reflect criticism from investors and US Republican officials that initiatives like NZAM run afoul of antitrust laws. These concerns have already prompted the United Nations’ parent NZAM to soften its policy on fossil fuels.
Vanguard’s defenders, including BlackRock Inc, have argued otherwise, saying participation in NZAM does not violate their rights. A BlackRock spokesman said on Wednesday the company was still part of NZAM.
Daniel Wiener, chairman of Adviser Investments in Newton, Massachusetts and a longtime Vanguard manager, said the company’s exit shows it doesn’t have the strong leadership on ESG issues that BlackRock has in its CEO, Laurence Fink.
“From this thing it’s just a blow to the Vanguard and the ever-changing winds. They don’t have a strong personality like Fink to support the cause,” said Wiener.
Kirsten Snow Spalding, vice-president of the non-profit organization Ceres, which is a founding partner of NZAM, said: “It is unfortunate that political pressure is affecting the financial need and trying to prevent companies from managing risks effectively – a very important part of their economic and reliable work.”
Lara Cuvelier, campaigner at Reclaim Finance, said NZAM could now push for change.
“Vanguard has taken no action in fulfilling its commitments,” Cuvelier said in a statement.