More than 30 million individual investors worldwide1 have entrusted Vanguard with their long-term savings, and we are committed to giving our clients the best chance for investment success and helping them achieve their financial goals.
Vanguard has an important role to play to safeguard investors from material financial risks, including climate risk, and to seek to mitigate potential harm to long-term shareholder value. Our firm’s leadership, as well as the many teams that develop, manage, steward and oversee our investment products, are committed to fulfilling this responsibility on behalf of Vanguard’s investors.
As a signatory to the Net Zero Asset Managers (NZAM) initiative, Vanguard has pledged to engage with companies, policymakers and other investment industry participants about the transition to net zero, and to identify the proportion of assets to be managed in line with the attainment of net-zero greenhouse gas emissions by 2050 or sooner. To date, we have seen meaningful progress across both our actively managed and index-based products as companies embrace greater disclosure of climate risks and plans and set specific science-based risk mitigation targets.
As at April 2022:
- $290 billion, or 17% of Vanguard’s $1.7 trillion2 in actively managed assets under management, are invested in a manner that aligns with achieving net-zero emissions by 2050 or sooner. A portion of these assets is in actively managed ESG products with net-zero commitments as part of the product design. The identified assets also include actively managed funds without explicit ESG mandates that nonetheless align to net-zero objectives because of the existing philosophy and process used by the investment managers to maximise total returns for investors.
- Separately, more than 70% of our equity index fund assets are invested in companies with emission-reduction goals. Vanguard manages more than $5 trillion3 in index equity assets, and according to data from MSCI that tracks company actions, over $1 trillion of those assets are invested in companies that have committed to net-zero targets. And according to MSCI, an additional $2.8 trillion in index equity assets are invested in companies that have some other form of emission-reduction targets. While these assets are not included in Vanguard’s initial NZAM commitment, in total, more than 70% of Vanguard’s index equity assets are invested in companies with publicly stated emission-reduction goals. Our investment stewardship teams will continue to engage with our index fund portfolio companies about their commitments.
We recognise that companies, financial markets and policymakers are in the early stages of a decades-long journey that simultaneously requires near-term action. As Vanguard continues to engage with companies, introduce new products and evolve our approach, we expect the portion of assets managed in alignment with net-zero objectives will increase. Several headwinds could impact progress, ranging from destabilising geopolitical events to inconsistent disclosures and methodologies, to the failure of governments to act individually and collectively.
Despite these challenges, we are committed to mitigating material financial risks, including climate-related risks, that can erode our clients' long-term investment returns and undermine their financial goals.
Vanguard’s Report on Climate-related Impacts 2021
1 Source: Vanguard as at 31 March 2022.
2 Source: Vanguard as at April 2022. Global assets under management (AUM).
3 Source: Vanguard as at April 2022. Global assets under management (AUM).