Vanguard Group has announced it is pulling out of an investment-industry initiative on tackling climate change, citing reasons like wanting to demonstrate independence and clarify its views for investors.
Top investors including Pennsylvania-based Vanguard have faced mounting pressure from Republican US politicians over their use of environmental, social and governance (ESG) factors in picking and managing securities.
The Net Zero Asset Managers (NZAM) initiative, launched in late 2020 to encourage fund firms to reach net zero emission targets by 2050 and limit the rise in global temperatures, has been a particular focus of criticism.
The exit from the initiative of Vanguard, which manages about $7 trillion in assets, is a blow to efforts to organise industries to move away from fossil fuels even though the fund manager insisted it “will not affect our commitment to helping our investors navigate the risks that climate change can pose to their long-term returns.”
Vanguard rivals including BlackRock have taken the opposite stance and said their NZAM participation does not conflict with their independence confirmed the company remains part of the iniative.
Daniel Wiener, chairman of Adviser Investments in Newton, Massachusetts and a long-time Vanguard observer, said the firm’s withdrawal showed it lacked a strong leader on ESG issues that BlackRock has in its CEO Laurence Fink.
“Backing out of this thing is simply Vanguard blowing with the winds of constant change. They don’t have a strong personality like Fink to champion a cause,” Wiener said.
In contrast to Wieners comments, London-based activist investor Bluebell Capital has called on BlackRock founder Larry Fink to resign as chief executive over the hypocrisy of the asset manager’s use of ESG investment factors.
Bluebell Capital Partners announced its concerns about the world’s largest money manager, releasing a letter it had sent to Fink last month.
Giuseppe Bivona and Marco Taricco, Bluebell’s co-chief investment officers, contended that BlackRock had changed positions several times on investing in thermal coal production while failing to live up to Fink’s widely publicised sustainability commitments. Shareholder data show Bluebell has about a 0.01% stake in BlackRock, with a market capitalisation of nearly £87bn.
“The contradictions and apparent hypocrisy of BlackRock’s actions have politicised the ESG debate,” they wrote. “The reputational damage of being dragged into this politically charged debate, in our view, is very significant because it calls into question the independence of BlackRock as an asset manager.”
The Bluebell partners added that it had “direct experience with BlackRock’s inconsistent approach”. They said BlackRock failed to support Bluebell’s position on environmental shareholder resolutions at mining and commodities group Glencore and chemicals group Solvay.
BlackRock said: “In the past 18 months, Bluebell has waged a number of campaigns to promote their climate and governance agenda. BlackRock Investment Stewardship did not support their campaigns as we did not consider them to be in the best economic interests of our clients.”
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