Vanguard Quits Net Zero Climate Effort

The Vanguard Group, Inc. — one of the largest asset management firms in the world — has announced it is pulling out of the Net Zero Asset Managers (NZAM) initiative on tackling climate change. The company said it wanted to demonstrate that it “speaks independently,” Investment Week reported.

A week ago, 13 Republican state attorneys general requested that the Federal Energy Regulatory Commission discontinue Vanguard’s ability to purchase utility stocks because it used environmental, social and governance (ESG) factors in choosing and managing financial securities.

“[W]e 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,” Vanguard said in a statement.

Vanguard joined NZAM in 2021, as investors protested the company’s investments in fossil fuel stocks and pressured it to call on energy companies to look for other options.

Vanguard said it left NZAM because joining the group had led to “confusion” about whether the firm would eventually ditch energy stocks, reported The Philadelphia Inquirer.

“It is unfortunate that political pressure is impacting this crucial economic imperative and attempting to block companies from effectively managing risks — a crucial part of their fiduciary duty,” said Kirsten Snow Spalding, a vice president at sustainability nonprofit Ceres, a NZAM founding partner, as Reuters reported.

Of the $8 trillion Vanguard invests for its clients, only four percent was dedicated to Net Zero’s plan to deliver 100 percent of energy from non-carbon sources by 2030, said spokesperson for Net Zero Jayson O’Neill, as reported by The Philadelphia Inquirer. The four percent doesn’t include large index funds managed by Vanguard, like American Electric Power, which uses coal, and Exxon.

“Backing out of this thing is simply Vanguard blowing with the winds of constant change. They don’t have a strong personality like [BlackRock CEO Laurence] Fink to champion a cause,” said Chairman of Adviser Investments Daniel Wiener, as Reuters reported.

Vanguard is responsible for more than $60 billion in investments in 10 of the biggest electric companies.

“Vanguard has never been serious about mitigating climate risk in its portfolios or for its clients,” said senior campaign representative with the Sierra Club’s Fossil-Free Finance campaign Jessye Waxman, as reported by Investment Week.

Waxman added that Vanguard leaving NZAM was a “confirmation of what Vanguard’s intentions have been all along: joining the initiative was just an exercise in greenwashing.”