Shareholders’ net zero criticism increasingly a headache for Vanguard

Following a merciless letter from an activist shareholder group last week, the US asset management giant has come under renewed pressure from shareholders as another shareholder has come forward to slam the company’s climate change policy.

The latest attack means Vanguard’s controversial climate stance is becoming increasingly a headache for the company and its board.

Only yesterday, Paul Rissman, the co-founder of Rights CoLab and a former director at AllianceBernstein, has sent Vanguard’s lead counsel a letter in which he states the company is putting investors’ money at risk by not addressing climate change concerns.

Rissman wrote: “As a Vanguard investor, I am writing to express serious concerns about how the long-term risk of climate change affects my portfolio value, and Vanguard’s failure to sufficiently manage these risks.”

Rissman singled out Vanguard’s decision to withdraw from the Net Zero Asset Managers Initiative as a move that has put the company’s own financial interest before shareholders’ interest.

Vanguard, which manages close to £7 trillion in assets worldwide, is “currently insufficiently managing the risk to my investment from climate change, which potentially violates fiduciary duties,” he said.

He urges Vanguard to adopt stewardship guidelines with regards to decarbonisation and formulate actions that should slow climate risks.

“[Vanguard should] expand offerings that are 1.5°C-aligned and provide investment products that are on a zero emissions pathway,” he wrote.

Vanguard reaction

In response, a spokesman for Vanguard told various news outlets: “As an investor-owned asset manager, Vanguard is singularly focused on maximizing our clients' returns and giving them the best chance for investment success.”

The spokesman added: “As we’ve long maintained, we consider climate change to be a material risk to companies and their shareholders, and are committed to continuing to help our investors navigate its impact on their long-term financial success.”

Only weeks ago, Vanguard's chief hit back at critics over the company’s decision to abandon the Net Zero Asset Managers initiative at the end of last year.

Speaking to the Financial Times at the end of February, Tim Buckley (above) stressed that, despite some media outlets reporting so, Vanguard has not changed the way it plans to tackle climate issues and related risks, and its main focus is still firmly on disclosure standards.

He explained the reason to walk away from the alliance was primarily because Vanguard’s “voice was simply being drowned out or confused” within the climate change group, which comprises of players from across the financial services spectrum.

'Failing' to invest responsibly 

Only days after Buckley's interview, a new report stated that the majority of global asset owners are 'failing' to invest in a way that will protect climate, biodiversity and people. 

The report singled out Vanguard as the worst performers.

Responsible investment charity ShareAction wrote in its Point of No Returns 2023 report that two-thirds of 77 asset managers surveyed - which control $60trn of assets - have “serious gaps” in their responsible investment policies and practices.

The report assessed the largest asset managers in Europe, US and Asia Pacific on whether their investment policies met basic responsible criteria, including on climate, biodiversity, social, governance and stewardship.

ShareAction then ranked the managers from best (AAA) to worst (E) in a league table. 

Vanguard received the lowest score of all respondents in the three thematic sections (climate biodiversity and social issues) combined.