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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowVanguard’s decision followed a “considerable period of review,” according to a company statement Wednesday. Withdrawing from the Net Zero Asset Managers initiative, which is a sub-unit of the Glasgow Financial Alliance for Net Zero, “will help provide the clarity our investors desire” about everything from the role of index funds, to financial risks in the context of climate change, the firm said.
Mark Carney, the former Bank of England governor who is the chief architect of GFANZ, said earlier this year the alliance has enjoyed considerable growth, and now represents some 550 members with roughly $150 trillion of assets in total. He also sought to dismiss reports that some members had grown uneasy with the alliance’s structure, amid concerns that they faced growing legal risks for appearing to avoid carbon-intensive sectors.
Vanguard indicated its decision rested in a desire to maintain the freedom not to restrict its investment options.
Initiatives such as the net-zero alliance “can advance constructive dialogue, but sometimes they can also result in confusion about the views of individual investment firms,” Vanguard said. “That has been the case in this instance, particularly regarding the applicability of net-zero approaches to the broadly diversified index funds favored by many Vanguard investors.”
The firm went on to say that its withdrawal from NZAM is part of a “continuous assessment of our participation in external organizations and their ongoing alignment with Vanguard’s mission and perspectives on investing.”
Indiana Attorney General Todd Rokita was among the leaders of multistate effort to stop companies like Vanguard from ESG investing, which puts an emphasis on environmental, social, and governance issues. The group said ESG strategies are designed not to maximize financial returns for clients but rather to impose social and economic agendas.
“Vanguard’s involvement in this leftist vendetta held the potential to cause real harm to Hoosier investors and energy consumers—affecting everything from retirement accounts to electricity bills,” Rokita said in a written statement. “By working together, fellow likeminded attorneys general and I have achieved an important win for free enterprise on behalf of our states.”
GOP politicians have made clear that they plan to ratchet up their attacks on firms suspected of being anti-oil, or “woke.” House Republicans are set to hold congressional hearings on the subject, while a number of anti-ESG bills will soon be introduced in states across the country.
Earlier this year, it emerged that two pension firms and an investment consultant dropped out of GFANZ. That coincided with reports that JPMorgan Chase, Bank of America Corp. and Morgan Stanley were mulling defection after a requirement “to phase down and out unabated fossil fuels, including coal” was introduced by Race to Zero, the UN-backed entity that underpins GFANZ. A swift clarification followed to soften that language, ostensibly in an effort to appease members.
Lawyers advising the finance industry have warned that concerns around legal risks are justified. If a bank or asset manager has “proclaimed” an intention to reach net zero by a given date, “but now realizes it won’t make that goal,” it’s in danger of Federal Trade Commission enforcement action, DLA Piper said on its website back in August. That “could result in significant investigative and litigation costs, large financial penalties, and negative publicity,” it said.
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Curious…..does Todd Rokita do ANYTHING for the benefit of Hoosiers??
This shows responsibility for their clients not the woke nonsense. Most of us have Vanguard funds in our retirement portfolios. Good move by Vanguard and I hope JP Morgan stays away also.
Well, this only benefits Hoosiers who want to maximize investment returns and not chase arbitrary goals with no real evidence they are achievable. I am always confused if this is Global Cooling, Global Warming, Climate Destruction, Climate Change (whatever that means) or saving the wombat.
Over 90 percent of the worlds scientists believe in climate change. I agree that there needs to be a reasonable period of time to transition away from fossil fuel but Tod Rokita needs to lean away from the Trumpian desire to lie about the truth.
Sad that being conscious of ESG is now frowned upon, it should be the basis of what we strive for. I need to relook at my funds and dump Vanguard. I would like to put my money where my beliefs are. So disappointing..
Phillip, just to clarify I also believe in Climate Change. There is no question. Just 20,000 years ago the “Wisconsin Glacier” covered the Midwest. It had been there 90,000 years. But humans had nothing to do with its arrival and certainly nothing to do with it receding. So why do we believe now we can move the needle. Such a political side show.
Rokita and others of similar ilk are focused on helping their coal-extracting campaign contributors. They talk only about the Environmental part of ESG to paint a false picture of rampant environmentalists run amok. But ESG also includes Social and Governance matters. In short, ESG investing means considering how a publicly traded company treats its employees, their families, the communities in which they operate, and even their shareholders. The thinking, based on lots of evidence, is that companies that treat people and the environment well, don’t make products that hurt people, are run well and are responsive to shareholders will be more profitable than poorly run companies that create liabilities. Therefore, to reject ESG is to be anti-worker, anti-family, anti-community, anti-shareholder rights, anti-smart investing. This is the stance that Rokita has taken pains to take.