Vanguard’s approach to ESG investing

INVESTMENTS YOU CAN BELIEVE IN

View ESG funds
null
Our approach to ESG

With more than 30 million investors globally who look to us to both safeguard and grow their investments, we think about environmental, social and governance (ESG) issues in the context of delivering long-term value to our investors and helping them to meet their objectives.

 

Read more about our approach

Investments you can believe in

We believe that material ESG risks, if left unchecked, can undermine long-term value in the companies in which we invest. Over time, well-governed companies, including those with sound practices to mitigate material ESG risks should outperform those that are poorly governed. As a result, we integrate ESG considerations into our investment processes and our product design in a number of ways.

Engage

As long-term owners of the companies in which our funds invest, we engage with companies on material ESG issues as we believe they can impact long-term value creation.

Allocate

Many of our active funds aim to allocate capital to companies based on how they manage ESG considerations, alongside other factors, even where they don’t have an explicit ESG investment strategy.

Avoid

We develop products that allow investors to avoid exposure to companies that are not aligned with their values, or to mitigate certain ESG risks.

Tackling climate change

As an investment manager and the steward of our clients’ assets, Vanguard has a duty to maximise total return for investors and to seek to encourage portfolio companies to take appropriate steps to mitigate material risks to those returns. Vanguard considers climate change—and the evolving global policy responses required to mitigate its impact—to be a material and fundamental risk to companies and to their shareholders’ long-term financial success.

Accordingly, we have an important role to play in engaging with, and encouraging real progress by, portfolio companies to mitigate the potential consequences of climate change. 

Engage through investment stewardship

Our approach to investment stewardship

To safeguard the investments of Vanguard’s 30 million investors worldwide, our global stewardship team engages with boards and management teams regularly; votes on issues at company annual general meetings and director appointments; and advocates for effective stewardship with long-term shareholder value in mind.

Key principles of our investment stewardship programme:

Board composition and effectiveness

Individuals who represent the interests of all shareholders should be independent, capable and experienced. In addition, we want boards to have appropriate gender and ethnic diversity, as well as diversity of thought and background.

Oversight of risk and strategy

Boards are responsible for effective oversight of relevant material risks, including environmental and social risks, and governance of the company’s long-term strategy.

Executive remuneration

Compensation policies linked to long-term performance are fundamental drivers of sustainable, long-term value for a company’s investors.

Shareholder rights

Corporate governance structures should empower shareholders and ensure accountability of the board and management.

null
Avoid the companies you don’t believe in

Some investors don’t want exposure to certain ESG risks or want to avoid companies that don’t align with their values. Vanguard currently offers several exclusionary ESG products across equity and fixed income that help investors to avoid certain ESG risks.

Download our exclusions primer

View our ESG exclusionary funds

Allocate capital with active funds

We look to the managers of our active funds to assess companies’ ESG risks on a case-by-case basis. Incorporating ESG risk into security selection for active funds without an explicit ESG mandate does not preclude the fund from investing in certain companies or sectors because of their business activities. Rather, it ensures ESG risks and opportunities are considered alongside other factors when selecting investments. 

Important risk information:

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

For further information on risks please see the “Risk Factors” section of the prospectus on our website.