Vanguard, the world’s second-largest asset manager, has refused to halt new investments in fossil fuel projects and cut off support for coal, oil and gas production.
CEO Tim Buckley said the group, which manages $ 8.1 trillion for more than 30 million investors, and that the largest investor in coal companies globally, it was determined to protect its customers from climate risks, but that would not require it to break new commitments to the fossil fuel industry.
“Vanguard does not seek to guide the company’s strategy. We work with companies on climate change, ask them to set goals and report on how they mitigate climate risks. That transparency will ensure that climate risks are appropriately assessed by the market, ”Buckley said in an interview with FT.
Companies that now have a large carbon footprint could play a key role in the transition to a low-carbon future, he added.
“It is our duty to maximize long-term total returns for customers. Climate change is a material risk, but it is only one factor in the investment decision. There is already a pension crisis and we need to make sure that climate concerns do not make it worse, ”Buckley said.
Buckley’s comments were made before the release of Vanguard’s first progress report on the goal of achieving net zero carbon emissions in all its investment portfolios by 2050.
Only $ 290 billion, or 17 percent, of Vanguard’s $ 1.7 billion in active asset management is aligned with net zero by 2050. This is expected to increase to 50 percent by 2030, which is an agreed provisional target date for members Net Zero Asset Managers Initiativea coalition of 235 large investors that together manage about $ 57.5 trillion.
But Vanguard has decided not to attribute temporary net zero targets to passive index-tracking funds that make up the majority of its assets. The company said it was because net zero targets were not built into the original targets of these funds. U.S. asset managers also have a fiduciary duty to maximize returns so that adding other goals not in the fund’s prospectus could expose them to legal challenges. Active managers have more freedom to decide which factors to use when deciding which companies to buy.
Vanguard also believes that achieving a 50 percent reduction in emissions in these passive funds by 2030 will be very difficult without significant action by the companies themselves and much more clarity on how government policy could evolve.
“More than 70 percent of Vanguard’s equity in the index is invested in companies with publicly stated emission reduction targets. Over $ 1 trillion of that asset has been invested in companies that have already committed to net zero targets, ”Buckley said.
Environmentalists claim that none of the world’s three largest asset managers – BlackRockVanguard and State Street – have policies that will achieve an absolute reduction in carbon emissions by the end of the decade.
Vanguard ranked last among 25 major asset managers in the fossil fuel and climate change assessment released by Reclaim Finance and Urgewald, two environmental campaign groups, in April.
“Asset managers need to send clearer signals to the fossil fuel industry. Any investor committed to achieving carbon neutrality by 2050 must do so immediately suspend all investments in companies developing new oil and gas supply projects, ”said Lara Cuvelier of Reclaim Finance.