Why “win-win” ESG solutions aren’t sufficient.
began airing in rural Pennsylvania close to where Vanguard, the giant asset manager, is headquartered. “When you save with Vanguard, you’re an owner of a catastrophic climate future,” the ad intoned. Sponsored by SOS, a network of civil-society organizations and financial experts, the ad criticized Vanguard for holding over $300 billion in the equities of fossil fuel companies.
It wasn’t all that long ago that Vanguard drew praise from similar organizations. In early 2021, Vanguard joined the Net Zero Asset Manager’s initiative . The alliance, mostly formed by European investors, aimed to achieve net-zero portfolio carbon emissions by 2050 or sooner. Announcing the move, Vanguard’s CEO Tim Buckley
the firm’s dedication to delivering “win-win solutions for long-term shareholder return and the goal of net-zero emissions by 2050.”that 80% of its assets were invested in passively managed index funds and that “Index fund managers don’t choose the securities in a fund or dictate a portfolio company’s strategy or operations.” The backlash was swift, with figures like Al Gore and New York City comptroller Brad Lander criticizing the decision.
But is that really true? A less-common, though more incisive, assessment is that Vanguard’s withdrawal was a coherent and honest approach, unlike the decisions of many of the asset managers who remain in the NZAM coalition while still owning fossil fuel stocks and overselling ESG products. Vanguard’s mistake was getting caught up in the euphoria and overpromising win-win solutions when it joined NZAM in 2021. Its decision to withdraw was a return to reason.
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