Vanguard CEO Tim Buckley has defended the firm’s decision to pull out of an investment industry climate change alliance.
Speaking to the Financial Times, Buckley claimed the voice of the world’s second largest asset manager was being ‘drowned out or confused’ when participating in the 300 firm alliance.
He added that his firm’s approach to managing climate related risk remains the same, and is focused on company disclosure standards. Buckley said he does not believe Vanguard should ‘dictate company strategy’ for other firms.
Presuming to know what the right strategy is for hundreds of companies would amount to ‘hubris’, Buckley said.
Vanguard withdrew from Net Zero Asset Managers (NZAM) in December, saying it wanted to speak independently about the risks relating to climate change and the role of passive funds.
At that time, the firm released a statement saying it had pulled out of NZAM to enable it to provide ‘the clarity investors desire about the role of index funds’ and make it clear that ‘Vanguard speaks independently on matter of importance to investors’.
The vast majority of Vanguard’s $7trn (£5.8trn) in assets under management sits in various market trackers. This means it has a lot of investor cash parked in fossil fuel companies due to their heavy presence in major indices.
Further complicating matters is the political backdrop. Vanguard, like most American asset managers, is under intense political pressure from two opposing sides.
On one hand, there are those who want investors to move away from fossil fuel producers, and on the side there are politicians demanding investment firms continue to support the industry.
In general, the former are Democrats and the latter are Republicans, although there are exceptions.
NZAM was formed in 2020 to coordinate the industry’s approach to investing in fossil fuels and tackle other climate related risks. It continues to count most of the industry’s largest firms among its membership, including Blackrock, State Street and JP Morgan.
See also: Asset managers signed up to ESG initiatives failing to vote accordingly
