Vanguard’s efforts to navigate climate activism get messy

Four months after exiting the Net Zero Asset Managers initiative, Vanguard is being depicted as a company doing nothing about climate change.

The Vanguard Group is drawing fire from climate-change activists for not doing enough to leverage its financial influence to try and make the world better.

“It’s not what Vanguard is doing, it’s what they’re not doing when it comes to integrating climate risk into their investment strategies beyond some vague concepts,” said Roberta Giordano, a finance campaigner with the Sunrise Project, one of the sponsors of Vanguard S.O.S.

In the latest effort in a year-long push against the $8 trillion asset manager, the Vanguard S.O.S. campaign started running a commercial on YouTube that connects investing through Vanguard to destroying the planet, under the heading, “If it’s bad for the environment, it’s bad for your retirement.”

The 30-second commercial accuses Vanguard of “crushing” retirement dreams and claims that “when you save with Vanguard, you’re an owner of a catastrophic climate future.”

Giordano said the focus is specifically on Vanguard, as opposed to some of the other large asset managers, “because 80% of Vanguard investments [are] with retail customers.

“We are really working hard to educate retail investors about the risk their investments hold,” she said.

Vanguard declined to comment for this story, but the campaign likely did not come as a surprise to the fund company, which has been navigating various climate activism and broader ESG efforts.

“Vanguard is running in circles trying to please everyone,” said Jeffrey DeMaso, editor of The Independent Vanguard Adviser.

In December, Vanguard shocked some market watchers when it boldly announced it was withdrawing from the high-profile Net Zero Asset Managers initiative.

“I was pleasantly surprised to see this move, and I’m optimistic we’ll see more asset managers move away from associations with green organizations that are thinly veiled political advocacy groups,” Charles Thomas III, founder of Intrepid Eagle Finance, said in January.

While some analysts and market watchers dismissed as inside baseball Vanguard’s pulling out of a commitment it agreed to in 2021 to making carbon reduction an investment strategy priority, most anticipated some ripple effects.

“Vanguard wants to be seen as a good corporate steward but in today’s polarized world, that means very different things to investors,” DeMaso said. “When they pulled out of the NZAM alliance, they said climate change was important, but their actions said they put running our index funds with low tracking error first. To be fair, running index funds at a low cost is why Vanguard has become so popular, but they clearly weren’t willing to stick their neck out on climate change.”

According to the Sunrise Project’s Giordano, Vanguard has acknowledged that “climate change is a material risk to investors, but has failed to release a comprehensive plan that integrates climate risk into investment strategies.”

Last month Vanguard S.O.S. organized to have more than 1,400 letters sent to Vanguard’s general counsel warning that the company “may be breaching its fiduciary duties by failing to mitigate climate risk.”

“The world stands to lose close to 10% of total economic value by mid-century if climate change stays on the currently anticipated trajectory, and if the Paris Agreement 2050 net-zero emissions targets are not met,” according to Vanguard S.O.S.

“Vanguard has $300 billion invested in fossil fuels, making it the largest investor in fossil fuels worldwide,” Giordano said. “Vanguard’s climate actions lag far behind even slow-moving peers like BlackRock and State Street.”

In addition to requesting a comprehensive plan outlining the steps the company will take to address climate risk, Giordano said her group wants Vanguard to adopt investment stewardship guidelines that prioritize decarbonization, support activities that mitigate climate-related business risks and communicate best-in-class industry standards by which portfolio companies will be assessed.

Anything short of that will result in more of the same from the climate activists.

“We are having conversations with lawyers and litigators,” Giordano said. “If Vanguard doesn’t do anything, maybe it will be time for investors to start putting their money with other companies.”

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