How Vanguard is invested in the climate crisis
Vanguard is the second largest asset manager in the world with over $5.6 trillion of assets under management. It is the largest provider of mutual funds and second largest provider of exchange-traded funds (ETF) in the U.S. Vanguard has billions of dollars invested in fossil fuels and agribusinesses responsible for deforestation - the two greatest contributors to the climate crisis.
Vanguard's climate risk by the numbers
- $372 BILLION invested in fossil fuels and agribusiness - the two greatest contributors to the climate crisis.
- $27 BILLION invested in deforestation-risk agribusiness companies (palm oil, paper/pulp, rubber, timber, cattle, and soy).
- $353 BILLION invested in fossil fuel companies in Vanguard funds. (See more on Vanguard's fossil fuel investments at Fossil Free Funds.)
- $229 MILLION invested in fossil fuels and agribusiness in Vanguard's so-called "sustainable" funds.
As of September 2021. Portfolios analyzed include U.S.-domiciled open-end funds and exchange-traded funds (ETFs) with at least 40% of assets invested directly in equities. Figures do not include any exposure from other asset classes such as fixed income funds, collective trusts, or funds domiciled outside the U.S. Some companies tracked are active in both fossil fuels and agribusiness, and this is reflected in the totals.
Vanguard's investments in deforestation and climate crisis include exposure to companies that are driving unprecedented fires in the Amazon Rainforest, destruction of critical wildlife habitats in Indonesia, and gross human rights violations around the world.
- Bunge, Archer Daniels Midland, and JBS have expansive plantations in Brazil that helped create the conditions for fires in the Amazon Rainforest resulting in the destruction of hundreds of thousands of hectares of forest. JBS in particular has also been implicated in illegal practices and corruption.
- Wilmar International is the largest palm oil trader in the world and holds a land bank of over 1,500,000 acres in Malaysia, Indonesia, West Africa and the Congo basin. Wilmar's operations have been frequently linked with deforestation, land grabbing, water pollution, protracted conflicts, bribery, destruction of critical wildlife habitat and forest fires. In 2013, Wilmar adopted a No Deforestation, No Peatland Destruction, No Exploitation policy; however independent reports have found that since 2013, Wilmar's suppliers have cleared a forest area totaling 21,500 hectares.
- Posco and its subsidiary PT Bio Inti Agrindo (PT BIA) are responsible for destroying 26,500 hectares of forest in Indonesia's Papua province. In 2015, the Norwegian Sovereign Wealth Fund divested from Posco Daewoo/Posco International and in June 2018 ABP, the world fifth largest pension fund, divested 300,000 Euros from the company over its failure to address deforestation.
What is in Vanguard's supposed "sustainable" funds?
Vanguard currently offers four funds that have a sustainability mandate. However, three out of four of Vanguard's "sustainable" funds include investments in both fossil fuels and deforestation-risk agribusiness companies.
- The dirtiest "sustainable" fund contains $119 MILLION in fossil fuel and deforestation-risk agribusiness companies.
- In total, Vanguard's "sustainable funds" contain $229 MILLION in the companies driving the climate crisis.
A lack of relevant or robust climate policies
Vanguard lacks relevant or robust policies regarding climate change, deforestation, or land grabbing. In the Vanguard's 'responsible investing policy overview,' the company mentions proxy voting, "effective management of environmental and social risks as an integrated component of good corporate governance practices," and "acting on environmental, social, and governance risks opportunities or risks." Vanguard does not have explicit policies to guide their investments or engagement with companies responsible for deforestation, land grabbing, or increased greenhouse gas emissions. Notably, within its ESG investing, Vanguard states that it takes into account "human rights, labor, and environmental concerns" in certain "sustainable funds," however a look under the hood reveals that even those funds include companies found to engaged in deforestation, land grabbing, and rights violations.
What should Vanguard Do?
- Make sustainability the default: Make fossil fuel and deforestation-free funds the default for all its investment products.
- Disclose its exposure to climate, deforestation, and related human rights risks.
- Commit to robust climate and no deforestation policies in order to reduce exposure to ESG risk and drive change in investee companies.
- Exclude from investment portfolios companies that routinely engage in deforestation, human rights abuses, and massive carbon emissions.
- Repair the damage by engaging with companies to remedy past harms through restoring damaged forests and eco-systems and implementing active and responsive grievance mechanisms.