Eight Quaker climate activists were arrested on Wednesday after demonstrating against Vanguard’s main headquarters in Malvern. The group sought to meet with the investment company’s chief steward, while emphasizing the company’s track record on environmental issues.
“We still haven’t seen Vanguard hold companies accountable,” said Christina Tavernelli, program manager at Quakers’ American Friends Society. “BlackRock has an exclusionary coal policy, unlike Vanguard.”
Together, BlackRock, Vanguard and State Street manage about $20 trillion and vote at least 25% of S&P 500 stocks. This gives companies outsized influence to shape corporate behavior, according to Earth Quaker Action Team, known as the name of EQAT, a group of climate activists based in Philadelphia.
READ MORE: From 2021: Climate campaign pushes Vanguard to act faster on fossil fuels
EQAT hopes to see Vanguard better integrate climate justice into its business decisions, including phasing out investments in companies that depend on coal, excluding fossil fuels from investments and committing that 100% of the money they manage to go to zero emissions by 2050.
Investment portfolios are the latest political football. Trillion-dollar asset managers are now the target of political activists left and right. Progressives argue that companies managing trillions of dollars in assets should do more to push underlying portfolio companies to fight climate change; political conservatives, meanwhile, say it could hurt returns for mom-and-pop retirees, who are trying to save as much as possible.
The reality of ESG investing – an acronym for environmental, social and governance issues – is complicated. Each company claims a varying level of commitment to climate policy.
To sort out the noise, a nonprofit called As You Sow maintains a free database called FossilFreeFunds.org that ranks all Wall Street funds by environmental metrics. Some Vanguard funds rank highly — such as the Vanguard Real Estate ETF, which earned an “A” rating — while others in the index fund category receive low or even “F” ratings.
“Vanguard is known for being this very large index provider, which doesn’t actively screen companies into their indexes,” said Daan Van Acker, program manager for InfluenceMap, a global firm that compiles data on how business and finance influence climate issues. . “As a result, stewardship is not a goal.”
Stewardship is the use of influence by institutional investors to maximize overall long-term value. Activists have expanded this to include common economic, social and environmental factors.
Compared to Vanguard, BlackRock’s CEO and stewardship staff “have been more vocal [on climate issues]. Over the past few years, BlackRock has published case studies that are accessible to everyone,” Van Acker said.
“Vanguard claims to be engaged on climate issues, but not specifically on process or outcomes,” he said. “Loyalty is a little worse. They don’t do much around the weather at the moment.
InfluenceMap gave BlackRock a “B” minus rating, Vanguard a “C” and Fidelity a “D” for its commitment to climate issues.
EQAT’s action on Wednesday was not the first. In April, the group lobbied Vanguard with a week-long march highlighting its holdings in coal, oil, gas and other polluting industries as “a major driver of climate destruction and racism. environmental”.
Groups such as EQAT want Vanguard to phase out thermal coal from all portfolios, prioritizing any companies that continue to expand their coal mines or coal-fired power generation capacity. Conservatives want to do nothing, Van Acker said.
And the Tories are now waging their own battle against what they claim is “woke” portfolio management, a direct response to groups like EQAT.
In August, a group of more than a dozen Republican-leaning state attorneys general signed a letter to BlackRock CEO Larry Fink suggesting that modifying portfolios for climate change inherently prevents shareholders from getting the best returns.
BlackRock “appears to be using the hard-earned money of the citizens of our states to circumvent the best possible return on investment,” the letter states. “BlackRock’s past public engagements indicate that it has used citizen assets to pressure companies to comply with international agreements such as the Paris Agreement.”
BlackRock was the first to commercialize ESG investing, said Charles Elson, a professor at the University of Delaware and editor of Directors & Boards magazine.
Elson, however, doesn’t think companies investing should be politically motivated. “Using other people’s money to advance a position you find attractive is problematic,” he said.
“Coal is still legal in this country. A pension plan’s obligation is to maximize value for those who invest,” he continued. “Once it becomes a tool to promote social change, the business is no longer the right place for it. This should happen at the governmental level.
Vanguard announced in August that it would launch another new ESG fund as part of a series aimed at socially responsible investing. The Vanguard Global Environmental Opportunities Stock Fund will hold a concentrated portfolio of companies that are involved in decarbonization and that derive at least half of their revenue from activities considered by the fund’s advisor to positively contribute to environmental change.
On Wednesday, the eight EQAT members were arrested for trespassing on Vanguard property and taken to the Tredyffrin Township Police Station. They were released without charge, EQAT spokeswoman Eileen Flanagan said.
Reflecting on Vanguard’s new ESG funds, Flanagan said, “It’s positive, but it’s not stewardship. That’s not what they promised: to engage with business to mitigate climate change. ESG funds are no substitute for using their influence at Exxon to change course.
Vanguard did not respond to requests for comment on Wednesday’s events.