Vanguard is proposing to change the screening criteria on five products in its passive ESG range to remove inconsistencies from its exclusion methodology.
Two ETFs, the £63.6m Vanguard ESG Global All Cap UCITS ETF (V3AM) and the £3.8m Vanguard ESG Global Corporate Bond UCITS ETF (V3GP), will have additional screening criteria added to their index methodology.
Three index funds, the £1.1bn Vanguard ESG Developed World All Cap Equity Index fund, £215m UK counterpart and the £125m ESG Emerging Markets All Cap Equity Index fund, will also see changes.
Under the changes, companies will be screened on the amount of revenue generated by primary involvement in producing certain products including alcohol, gambling, adult entertainment, tobacco, conventional weapons, civilian firearms and non-renewable energy.
Currently, the screening only takes place at the primary level but will be extended to secondary involvement through activities such as retailing.
A spokesperson for Vanguard said: “The proposed changes to the security screening methodologies of the indexes tracked by Vanguard’s passive ESG funds are intended to create consistency across the lineup.
“The new screening methodologies are the latest example of the continued evolution and increasing sophistication of ESG indexes intended to align with the changing needs and preferences of investors.”
V3AM was launched last March and currently tracks the FTSE Russell Global All Cap Choice index while V3GP tracks Bloomberg MSCI Global Corporate Float-Adjusted Liquid Bond Screened index and launched in May 2021.
The changes will be effective from 21 March in line with the rebalancing of the indices.
The move comes as competitors continue to switch indices into ESG-versions of the same product, sometimes through adding screens and sometimes through changing indexes altogether.