Huge Investment Firm Leaves Climate Alliance

( Investment giant Vanguard announced last week that it was pulling out of a major net zero climate change initiative to show investors that it acts independently.

In an announcement last Wednesday, the world’s top mutual fund manager said it was pulling out of the Net Zero Asset Managers (NZAM) initiative.

Many top investors, like the Pennsylvania-based Vanguard, have faced growing pressure from Republican-led states over their use of ESG (environmental, social, and governance) in picking and managing securities.

NZAM was launched in late 2020 to encourage investment firms to reach net zero emission targets by 2050 to limit the rise in global temperatures. By last month, NZAM had 291 signatories representing approximately $66 trillion in assets under management.

Vanguard had $7.1 trillion under management as of the end of October.

The move to leave NZAM is a turnaround for Vanguard which, as recently as May, was touting its commitments to align itself with NZAM’s goals.

But in its statement on Wednesday, Vanguard said while initiatives like NZAM can be constructive, they also create confusion about the views of individual firms. The mutual fund manager decided to withdraw from NZAM to “provide the clarity our investors desire” regarding the role of index funds, including Vanguard’s position on “material risks, including climate-related risks” while clarifying that Vanguard “speaks independently on matters of importance to our investors.”

Vanguard said its withdrawal will not affect its “commitment to helping our investors navigate the risks that climate change can pose to their long-term returns.”

The decision by Vanguard is a blow to the ongoing efforts to organize industries to move away from fossil fuels.

Kirsten Snow Spalding, vice president at sustainability nonprofit Ceres, an NZAM founding partner, blamed Vanguard’s departure on “political pressure.”

In a statement after Vanguard pulled out, Spalding said it was “unfortunate” that political pressure is hurting “this crucial economic imperative.” She claimed that political leaders are “attempting to block companies from effectively managing risks,” which she described as “a crucial part of their fiduciary duty.”