Top investors, including Vanguard, are under pressure from Republican US politicians over the use of ESG factors in investments.
Vanguard Group Inc is pulling out of a leading investment industry initiative to tackle climate change, the world’s largest mutual fund manager has said, explaining that it wants to demonstrate independence and clarify its positions for investors.
Top investors, including Pennsylvania-based Vanguard, are under increasing pressure from US Republican politicians for their use of environmental, social and governance (ESG) factors in selecting and managing securities.
One of the criticisms was the effort known as the Net Zero Asset Managers (NZAM) initiative, launched in late 2020 to encourage fund companies to meet net zero emissions targets by 2050 and limit the rise in global temperatures . As of November 9, NZAM had 291 signatories representing approximately $66 trillion in assets under management.
The departure from Vanguard’s initiative, which manages approximately $7 trillion in assets, is a blow to efforts to organize industries to move away from fossil fuels, despite Vanguard insisting it “will not affect our commitment to helping our investors navigate the risks.” that climate change can shape for their long-term returns”.
As late as May, Vanguard touted commitments it had made in line with NZAM’s goals. On Wednesday, Vanguard posted a statement on its website saying that industry initiatives like NZAM can cause confusion.
“We have decided to withdraw from NZAM so that we can provide the clarity our investors desire about the role of index funds and how we feel about material risks, including climate-related risks – and to make it clear that Vanguard speaks independently on matters important to our investors,” Vanguard said in the pronunciation.
Closely followed Vanguard did not make executives available for comment. But the statement addresses criticism from some investors and US Republican officials that efforts like NZAM violate antitrust rules. Those concerns had already led NZAM’s United Nations-affiliated parent company to relax a policy on fossil fuel financing.
Vanguard’s rivals, including BlackRock Inc, have taken the opposite view, saying their NZAM participation does not conflict with their independence. A BlackRock spokesperson said Wednesday that the company will remain part of NZAM.
Daniel Wiener, chairman of Adviser Investments in Newton, Massachusetts and a longtime observer of Vanguard, said the company’s withdrawal showed it lacked a strong leader on ESG issues that BlackRock has in its CEO, Laurence Fink.
“Pulling out of this thing is just Vanguard blowing with the wind of constant change. They don’t have a strong personality like Fink to stand up for a cause,” Wiener said.
Kirsten Snow Spalding, vice president of sustainability nonprofit Ceres, a co-founder of NZAM, said in a statement: “It is unfortunate that political pressure is impacting this critical economic necessity and trying to dissuade companies from effectively managing risk. to manage – a crucial part of their duty of trust.”
Lara Cuvelier, a campaigner at Reclaim Finance, said NZAM can now push harder for change.
“Vanguard was never serious about implementing its net zero obligation,” Cuvelier said in a statement.