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Vanguard leaves group that defends zero emissions, in blow to ESG cause

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On Wednesday, Vanguard said that industry initiatives such as this group, known by the acronym NZAM (Image: Shutterstock)

THE vanguardthe world’s largest mutual fund manager, said on Wednesday it was withdrawing from a key initiative by industry in investments to combat climate change, explaining that he wants to demonstrate independence and make his views clear to investors.

Big investors, including Pennsylvania-based Vanguard, face pressure from U.S. Republicans. United States on the use of environmental, social and governance factors (ESG) in choosing and managing bonds.

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A focus of criticism has been the effort launched in 2020 to encourage fund companies to reach net-zero emission targets by 2050 and limit the rise in global temperatures.

As of November, the group had 291 signatories, representing about $66 trillion in assets under management.

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The departure of Vanguard, which manages about $7 trillion in assets, is a blow to efforts to organize industries to move away from fuels fossil fuels, although the fund manager insisted it would not affect its commitment to helping investors address the risks that climate change could pose to their long-term returns.

In May, Vanguard disclosed commitments it had made in line with the group’s goals. On Wednesday, Vanguard said that industry initiatives such as that of this group, known by the acronym NZAM, could create confusion.

“We have decided to withdraw from NZAM so that we can provide the clarity our investors want about the role of index funds and how we independently think about material risks, including weather-related risks,” Vanguard said in the statement.

Vanguard could not immediately make executives available for comment. But his statement addresses a criticism from some US Republican investors and officials that efforts like NZAM go against antitrust rules.

That concern has already led NZAM’s UN-affiliated parent company to soften a policy on financing fossil fuels.

Rivals of Vanguard, including BlackRock, have taken the opposite view and said their membership in NZAM does not conflict with their independence.

Daniel Wiener, president of Adviser Investments in Newton, Massachusetts and a longtime observer of Vanguard, said the company’s pullout shows it lacks a strong leader on ESG issues.

“Backing off is simply Vanguard blowing with the winds of constant change. They don’t have a strong personality like Fink to champion a cause,” Wiener said.

Source: Moneytimes

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