Investment firm Vanguard Inc. has announced that it’s pulling out from a major climate initiative as the company faces increasing pressure for its policy of using environmental, social, and governance (ESG) factors while investing in securities.
In 2021, Vanguard joined the Net Zero Asset Managers initiative (NZAM), which aims to push the asset management industry toward a goal of reaching net-zero emission targets by 2050. As of November, NZAM had 291 signatories representing about $66 trillion worth of assets under management.
“Therefore, after a considerable period of review, we have decided to withdraw from NZAM so that we can provide the clarity our investors desire about the role of index funds and about how we think about material risks, including climate-related risks—and to make clear that Vanguard speaks independently on matters of importance to our investors,” the company stated.
Index fund managers buy and hold all securities in a benchmark index, seeking to gain the return that a specific market provides. About 80 percent of Vanguard client assets are invested in index funds. The company manages funds from over 30 million investors worldwide.
Response, GOP Pressure
Kirsten Snow Spalding, a vice president at sustainability nonprofit Ceres—an NZAM founding partner—said in a statement that “political pressure is impacting this crucial economic imperative and attempting to block companies from effectively managing risks.”Together with 13 Republican attorneys general, educational organization Consumers’ Research recently filed a motion that sought to block Vanguard from buying shares of publicly listed utility firms due to its decarbonization agenda.
