Industry Updates

Vanguard quits Net Zero Asset Managers alliance

Citing the need for clarity and independence for its investors

Theo Andrew

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Vanguard has withdrawn from the Net Zero Asset Managers (NZAM) initiative, a major investment industry group created to battle climate change, stating it wants to improve clarity for its investors.

The $7trn asset manager said it wants to ensure investors that it “speaks independently” on important issuers and added that NZAM had only heightened confusion about the views of individual investment firms.

It comes following increasing pressure from US Republican politicians over the use of ESG factors when investing.

NZAM, launched in 2020, is aimed at encouraging asset managers to hit net-zero targets by 2050 but has faced increasing criticism since its inception, with leading Republican figures stating the initiative goes against antitrust rules.

“Such industry initiatives can advance constructive dialogue but sometimes they can also result in confusion about the views of individual investment firms,” Vanguard said in a statement.

“That has been the case in this instance, particularly regarding the applicability of net zero approaches to the broadly diversified index funds favoured by many Vanguard investors.

“We have decided to withdraw from NZAM to provide the clarity our investors desire about the role of index funds and 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 asset manager added the decision to leave will not affect its commitment to helping investors manage the risks of climate change can pose on their long-term portfolio.

Vanguard’s closet rivals BlackRock, which remains a member of NZAM, has taken a different approach to ESG investing.

Earlier this week, activist investor Bluebell Capital Partners called on BlackRock founder, chairman and CEO Larry Fink to resign due to the “hypocrisy” of the firm’s approach to ESG.

Bluebell’s co-chief investment officers Giuseppe Bivona and Macro Taricco said BlackRock had changed its position several times on investing in thermal coal production, while Fink spoke often of its sustainability commitments.

“The reputational damage of being dragged into this politically charged debate, in our view, is very significant because it calls into question the independency of BlackRock as an asset manager,” the pair wrote.

It comes after the state of Texas placed BlackRock on a list of asset managers it considers hostile to fossil fuel, with several other Republican states withdrawing money from the firm’s funds.

Meanwhile, senior Democrats have criticised BlackRock for not going far enough in its ESG commitments. 

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