Vanguard quits climate alliance in blow to net zero project

Vanguard is pulling out of a major financial alliance to fight climate change at a time when Republicans in the US have stepped up their attacks on financial institutions that they say are against fossil fuels.

With $7.1tn under management and more than 30mn clients as of October 31, Vanguard is the second largest global fund manager after BlackRock. The group said on Wednesday that it was resigning from the Net Zero Asset Managers initiative, whose members had committed to zero carbon emissions by 2050.

Vanguard, a cross-border fund that tracks market indices, said the coalition’s strong commitment to fighting climate change has led to “confusion about the way investment companies think about one another.” “one”.

“We have decided to draw on NZAM to be able to provide our investors with a clear understanding of the role of investment funds and how we think about property risks, including climate-related risks – and to make it clear that Vanguard speaks independently on matters of importance to our investors,” the Pennsylvania company said in a statement.

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NZAM was established in December 2020 and has 291 members managing $66tn in assets as of November. Last year NZAM joined the climate finance industry, the Glasgow Financial Alliance for Net Zero (Gfanz) at its launch last year under Mark Carney, former governor of the Bank of England. Vanguard will leave both groups.

In a statement, NZAM said Vanguard’s decision was regrettable.

“It’s unfortunate that political pressure is affecting this very important economy and trying to prevent companies from managing risk effectively,” said Kirsten Snow Spalding of Ceres, an investment group and said an environmental group and partner of NZAM.

Many of the world’s leading asset managers belong to NZAM, including BlackRock, State Street, JPMorgan Asset Management and Legal & General. Notable places include Fidelity Investments and Pimco, both based in the US.

Vanguard said the project has been in the works for months. It will continue to offer products that use the environment, social relations and management control and free products to investors who want them. Vanguard will still ask the companies it invests in how they plan to address climate risk.

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Last month, a group of Republican lawmakers asked the Federal Energy Regulatory Commission not to renew Vanguard’s right to buy shares in US utilities. They cited his NZAM membership as evidence that he was trying to influence corporate policy rather than being a disaffected investor.

The move is part of a broader attack by Republicans on ESG investing. Several Republican states have removed funds from other investment accounts from BlackRock, which under CEO Larry Fink has expressed the need to take climate change into account in investing. Texas comptroller Glenn Hegar said the NZAM group was one of the factors he used to compile a list of companies he accused of “dumping” fossil fuels.

Republican state attorneys general also want Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo to turn over information about Gfanz’s banking involvement.

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The environmental group filed a second lawsuit against Vanguard after the announcement.

Jessye Waxman, the non-profit Sierra Club’s campaign manager, said: “Vanguard is not essential to climate risk reduction. For Vanguard, “joining NZAM is just an exercise in greenwashing”.

At least two pension funds, Cbus Super and Bundespensionskasse, have left Gfanz’s private equity division, while investment manager Meketa has left another division. Several Wall Street banks, including JPMorgan Chase, Morgan Stanley and Bank of America, threatened to pull out over the summer because they were worried they would be sued for making tough decisions.

Gfanz responded by undermining his commitment to the UN climate goals that called on members to reduce their greenhouse gas emissions by 2030.

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