Major investors, including Vanguard, are under pressure from Republican US politicians to use ESG factors in their investments.
Vanguard Group Inc. is withdrawing from a leading investment-industry initiative to combat climate change, the world’s largest mutual fund manager said, saying it wants to demonstrate independence and clarify its approach to investors.
Major investors, including Pennsylvania-based Vanguard, are facing intense pressure from US Republican politicians to use environmental, social and governance (ESG) issues in selecting and managing securities.
One focus of criticism is the effort, known as the Net Zero Asset Managers (NZAM) initiative, launched by the end of 2020 to help financial institutions reach a net zero emissions target by 2050 and limit global warming. As of November 9, NZAM counted 291 signatories representing some $66 trillion in assets under management.
The withdrawal of the Vanguard initiative, which manages nearly $7 trillion in assets, is a major setback in efforts to organize industries to move away from fossil fuels, although Vanguard said it “will not affect our commitment to ensuring our investors manage the risks climate change can bring to their long-term returns.”
Like May, Vanguard was echoing his promises in line with NZAM’s goals. On Wednesday, Vanguard released a statement on its website saying industry initiatives such as NZAM could cause confusion.
“We have decided to withdraw from NZAM to make it clear to our investors how we think about the role of index funds and material risks in relation to climate-related risks – and that Vanguard will speak on individual issues,” Vanguard said in a statement of the importance to our investors.
The closely held Vanguard did not make executives available for comment. But the statement faces criticism from some investors and US Republican officials who say efforts like NZAM run afoul of antitrust rules. That concern has led NZAM’s parent organization, the United Nations, to soften policy on fossil fuel financing.
Vanguard’s rivals, including BlackRock Inc, have taken the opposite stance and say their involvement in NZAM does not conflict with their independence. A BlackRock spokesperson said on Wednesday that the company is part of NZAM.
Daniel Wiener, chairman of Newton, Massachusetts-based Advisory Investments and a longtime Vanguard observer, said the company’s exit shows BlackRock lacks a strong leader on ESG issues in CEO Laurence Fink.
“Getting out of this thing is the vanguard spirit of constant winds of change. “They don’t have a strong personality like Fink to win the cause,” Wiener said.
Kirsten Snow Spaulding, NZAM’s founding partner and vice president of sustainability non-profit Ceres, said in a statement: “It’s unfortunate that political pressure is affecting this critical economic imperative and trying to block companies from effectively managing risks – an integral part of their business.” duty of loyalty”.
Campaigner Lara Cuvelier at Reclaim Finance said NZAM could now push harder for change.
“Vanguard has never been serious about implementing a net zero commitment,” Cuvellaire said in a statement.