Mutual fund management giant Vanguard Group has decided to end it ties with Net Zero Asset Managers (NZAM), an investment-industry initiative formed to handle climate change.
NZAM supports fund companies to achieve net zero emission targets by 2050 and restrict the surge in temperature across the globe. Vanguard joined NZAM in 2021.
The move is driven by the firm’s decision to maintain freedom while offering investment options to its clients.
It is also aimed at providing clarity to the company’s investors in terms of index funds, which offer access to stock and bond markets at reduced cost.
Vanguard currently invests around 80% of its clients’ assets through index funds.
The firm’s departure from NZAM is seen as a major setback to endeavours that promote industries to pull back from fossil fuels usage.
Until 9 November this year, the initiative has 291 signatories with around $66tn in assets under management, reported Reuters.
In a statement, Vanguard said: “Such industry initiatives can advance constructive dialogue, but sometimes they can also result in confusion about the views of individual investment firms.
“That has been the case in this instance, particularly regarding the applicability of net zero approaches to the broadly diversified index funds favored by many Vanguard investors.
“Therefore, after a considerable period of review, we have decided to withdraw from NZAM so that we can provide the clarity our investors desire about the role of index funds and about how we think about material risks, including climate-related risks—and to make clear that Vanguard speaks independently on matters of importance to our investors.”