Vanguard Drops Out of Climate Initiative as Reaction Against Woke ESG Investing Continues

Investment firm Vanguard Inc. has announced that it’s pulling out from a major climate initiative as the company faces increasing pressure for its policy of using environmental, social, and governance (ESG) factors while investing in securities.

In 2021, Vanguard joined the Net Zero Asset Managers initiative (NZAM), which aims to push the asset management industry toward a goal of reaching net-zero emission targets by 2050. As of November, NZAM had 291 signatories representing about $66 trillion worth of assets under management.

In a Dec. 7 corporate statement, Vanguard said there’s been confusion about the applicability of net-zero approaches to the diversified index funds favored by the company’s investors.

“Therefore, 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,” the company stated.

Index fund managers buy and hold all securities in a benchmark index, seeking to gain the return that a specific market provides. About 80 percent of Vanguard client assets are invested in index funds. The company manages funds from over 30 million investors worldwide.

Vanguard currently manages about $7 trillion in assets. As such, its exit will be a significant hit to NZAM. Vanguard’s decision comes as the firm has been under scrutiny and pressure from Republicans for using ESG criteria in picking securities.

Response, GOP Pressure

Kirsten Snow Spalding, a vice president at sustainability nonprofit Ceres—an NZAM founding partner—said in a statement that “political pressure is impacting this crucial economic imperative and attempting to block companies from effectively managing risks.”

Together with 13 Republican attorneys general, educational organization Consumers’ Research recently filed a motion that sought to block Vanguard from buying shares of publicly listed utility firms due to its decarbonization agenda.

Given Vanguard’s links with NZAM and other climate alliances, it “cannot possibly have refrained from interfering with or exercising some measure of control or influence over these coal- and gas-powered energy companies,” Indiana Attorney General Todd Rokita said in November.

In August, Vanguard was one of the investment firms that received a letter from the Texas Senate Committee on State Affairs seeking documents related to how the company conducts its decision-making process.

Reuters contributed to this report.

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Naveen Athrappully is a news reporter covering business and world events at The Epoch Times.

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