On Tuesday, October 19th, we read the exciting news that Vanguard, the world’s second largest asset manager and a leading investor in fossil fuels and deforestation, had committed to taking impressive steps to tackle its role in the climate crisis, steps that none of its industry peers have taken.
The announcement, originally reported by Responsible Investor, included an inspiring climate commitment (along with some cheeky “Vanguardians of the Glaxay”) that by 2030, Vanguard would offer its clients fossil-free and deforestation-free investment options by default. This is what we call the North Star of asset manager climate commitments. Sadly, not long after it was posted, the Responsible Investor article was taken down and chatter began on Twitter that the announcement was likely a bluff.
It is a huge disappointment that Vanguard did not actually demonstrate the climate leadership so urgently needed from a financial giant of its caliber. Vanguard has become the top investor in coal, a dying, yet still horribly harmful industry, and one of the two biggest investors in oil and gas. Research shows that Vanguard stands to lose $3T by 2050 if it fails to act on climate. Early this year, Vanguard signed on to the Net Zero Asset Managers Initiative, but it has yet to release concrete plans for emissions reduction in line with a 1.5 degree climate scenario.
The fake announcement exposes the dire lack of climate leadership that is much needed from the company. It also painfully points out Vanguard’s ongoing failure to address its role in driving the climate crisis, as well as failing to integrate climate as a financial risk for its clients.
In less than two weeks, political decision makers, corporations, and civil society will meet at the global climate conference, COP26, in Glasgow. This year’s conference will dedicate special focus to the role financial institutions play in addressing the climate crisis. So far, Vanguard has in no way indicated how it will measurably reduce its significant support for the climate destructive companies it invests in.
But there is a lot Vanguard could do to be a real climate leader:
- Implement a concrete timeline to tackle its climate problem. A 10-year plan would be much more effective than the vague “net zero by 2050” commitments others have made.
- Ensure that every company in Vanguard’s portfolios is on track to real emission reductions in line with science-based targets ASAP.
- Focus on “absolute carbon emissions reduction.” Without actually lowering the emissions of its portfolio, no asset manager will be able to align its business with the 1.5 degree pathway we need.
- Implement a fossil-fuel exclusion policy and screening out corporations driving the climate crisis, such as coal, oil, gas, and companies driving deforestation.
- Adopt a policy that recognizes the rights of Indigenous peoples, applied across all extractive sectors. This would help ensure that Vanguard’s business is aligned with Human Rights and does not cause further harm to communities most affected by the escalating climate crisis.
- Increase the capacity and resources dedicated to managing sustainable investment innovation, including naming a Sustainability Director. A senior position with the power to drive decisions within Vanguard would be a key step in ensuring accountability and effective proxy voting at the companies in the asset manager’s portfolio.
Time is running out, and it is time for Vanguard to deal with its climate problem. Perhaps the failing financial giant should take a hint from The Fixers and adopt their climate plans as its own.