Vanguard unveils ESG funds as climate change activists protest at its headquarters

Efforts to pursue socially responsible investment strategies continue to be controversial, with some complaining about “woke” companies and others saying that investment funds are not doing enough to offer environmental, social, and governance (ESG) options.

One recent development was the arrest of eight activists who were protesting at the headquarters of Vanguard, in Pennsylvania. Vanguard, one of the nation’s largest mutual investment funds, has been a target for activist groups, who say the company should do more to phase out investments in energy companies that are too fossil-fuel friendly.

Protestors associated with the Earth Quaker Action Team (EQAT) were arrested on Sept. 21 at the Vanguard headquarters in Malvern, a suburb of Philadelphia.

According to reporting in Patch, the small group of activists from EQAT and Rebellion Philly held a banner saying, “Vanguard Stewards Climate Destruction.” They demanded to meet with Vanguard’s global head of investment stewardship, John Galloway.

“Galloway has not responded to a year and a half of requests to meet with representatives of the international campaign pressuring Vanguard’s tepid climate plans. When asked again for a meeting today, Vanguard had the activists arrested,” EQAT officials said in a statement. “As of 2021 Vanguard had over $300 billion in fossil fuel exposure, and it actually increased its coal investments to $101 billion, making it one of the world’s largest investors in the coal industry. The Vanguard S.O.S campaign is calling on Vanguard to implement a series of solutions to address the climate crisis and the detrimental impacts of its investments.”

Pushback against woke companies

As these kinds of protests are behind held, a political movement has risen against being woke— a difficult term to define but generally associated with pro-environment and/or pro-civil rights stances. The anti-woke movement is, generally speaking, led by Republicans and seen as a reaction to progressive or liberal movements.

The result is a no-win situation for businesses, since there is such broad support for these movements among customers and employees. For example, employers have spent a lot of time working on issues around diversity, equity, and inclusion (DEI), mostly due to the demands of employees.

But it’s safe to say the business world is struggling to satisfy the expectations of Americans, who continue to be strongly divided on political issues. Conservative states like Florida and Texas are proposing to punish or sanction companies for being too “woke,” while states like California and New York have taken steps to punish companies for not doing enough to be socially responsible.

On Aug. 4, 19 state attorneys general—all Republicans—sent a letter to BlackRock CEO Larry Fink, critical of the company’s recent comments on environmental issues. The AGs said that instead of working in the interests of shareholders, Blackrock was prioritizing environmental goals.

“Our states will not idly stand for our pensioners’ retirements to be sacrificed for BlackRock’s climate agenda,” the attorneys general said. “The time has come for BlackRock to come clean on whether it actually values our states’ most valuable stakeholders, our current and future retirees, or risk losses even more significant than those caused by BlackRock’s quixotic climate agenda.”

BlackRock’s CEO, Larry Fink, has responded to the criticism by saying his firm is simply gauging risk by looking at factors such as climate change. “Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not ‘woke.’ It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper,” Fink said. “This is the power of capitalism.”

Vanguard and Ninety-One

The issue of climate change will probably continue to be a challenge for investors. Vanguard points to its actions to address the concerns of stockholders interested in fighting climate change, but groups like EQAT say the company is moving too slowly.

On Aug. 16, Vanguard announced the launch of its Global Environmental Opportunities Stock Fund. The fund includes a portfolio of companies that are involved with the process of decarbonization and that derive at least half of their revenues from activities that contribute positively to environmental change, Vanguard officials said.

The fund will be managed by Ninety One, an active investment manager with a background in environmental, decarbonization, and global investing.

“Vanguard has been thoughtful and deliberate in building out our ESG lineup by ensuring each new fund addresses investors’ enduring needs” said Dan Reyes, head of Vanguard Portfolio Review Department. “We are confident that Ninety One’s differentiated approach to global ESG investing will add long-term value for risk-tolerant investors who have a preference for environmental investing.”