The Vanguard Group, the second largest financial asset manager, announced it will be withdrawing from the Net Zero Asset Managers (NZAM) initiative.
Per a company statement, their decision to exit NZAM—which it joined in 2021—stems from desiring “independence” about how their investment firm’s views on material financial risks (i.e. climate risks) are perceived.
“Therefore, after a considerable period of review, we have decided to withdraw from NZAM so that we can provide the clarity our investors desire about the role of index funds and about how we think about material risks, including climate-related risks—and to make clear that Vanguard speaks independently on matters of importance to our investors. This decision is part of our continuous assessment of our participation in external organizations and their ongoing alignment with Vanguard’s mission and perspectives on investing,” the statement read.
The company, however, added that their NZAM membership status won’t affect how “investors navigate the risks that climate change can pose to their long-term returns.”
NZAM was launched in 2020 to achieve net-zero emissions by 2050 and encourage investment aligned with net-zero goals. The initiative boasts 291 signatories that collectively manage $66 trillion in assets under management (AUM) and endorses the United Nations’ Race to Zero campaign.
Vanguard’s decision to reassess membership in NZAM comes as the Environmental, Social, and Governance (ESG) movement faces greater scrutiny from investors and Republican lawmakers.
As IWF Senior Policy Analyst Mandy and I discussed in a recent op-ed, the ESG movement is facing opposition from within the finance industry:
A September 2022 CNBC CFO Council Survey revealed executive frustration with both regulators and asset managers that force ESG behaviors on business practices. Only 25 percent of CFOs polled support the proposed Security and Exchange Commission Scope 3 rules, compared to 55 percent of CFOs who oppose it. Thirty-five percent of respondents “strongly oppose” the SEC rule. With respect to states banning ESG considerations in state pension funds, the same survey revealed that 45 percent of CFOs support Republican governors banning them, compared to 30 percent who were neutral on the issue and 25 percent who were opposed.
House Republicans are expected to take action against financial institutions and government agencies, including the Securities and Exchange Commission (SEC), pushing ESG policies.
To learn how to fight ESG, check out our guide HERE.