Vanguard quits Net Zero Asset Managers initiative

The world’s second largest fund manager said yesterday (7 December) that it would be leaving the group, whose members commit to reaching net zero carbon emissions by 2050.

In a statement, Vanguard attributed the decision to the initiative resulting in “confusion about the views of individual investment firms,” especially “regarding the applicability of net zero approaches to the broadly diversified index funds”.

It continued: “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.”

Vanguard added that the move “will not affect our commitment to helping our investors navigate the risks that climate change can pose to their long-term returns”.

NZAM was found in 2020 and currently has 291 members that manage $66trn in assets under management.

In 2021, NZAM joined the Glasgow Financial Alliance for Net Zero, led by former Bank of England governor Mark Carney. Vanguard will be leaving both groups.

Over the summer, major assets managed threatened to leave GFANZ due to the group’s decarbonisation policies being viewed as too strict. In response, the group dropped the compulsory promise to halve emissions by 2030.

In a statement to the Financial Times, Kirsten Snow Spalding of Ceres, a coalition of investors and environmental groups and founding partner of NZAM, attributed the decision to the growth of anti-ESG politics in the US.

“It is unfortunate that political pressure is impacting this crucial economic imperative and attempting to block companies from effectively managing risks,” said Spalding.

In November, a group of Republican attorneys general asked the Federal Energy Regulatory Commission to not renew Vanguard’s ability to buy shares in US utilities, partially due to NZAM membership.

Jessye Waxman, senior campaign representative with the Sierra Club’s Fossil-Free Finance campaign, said in a statement that “Vanguard has never been serious about mitigating climate risk in its portfolios or for its clients”.

Waxman said that Vanguard’s decision to leave NZAM was a “confirmation of what Vanguard’s intentions have been all along: joining the initiative was just an exercise in greenwashing”.

The statement noted that despite being a member of NZAM since March 2021, Vanguard has committed to align less than 5% of its AUM with net zero goals.