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Vanguard refuses to end new fossil fuel investments

The world’s second-largest asset manager Vanguard has refused to halt new investments in fossil fuel projects and end support for coal, oil and gas production.

CEO Tim Buckley said the group, which manages $8.1 billion for more than 30 million investors and is biggest investor in coal companies globally, has been determined to protect its customers from climate risks but this will not require it to end new commitments to the fossil fuel industries.

“Vanguard does not seek to shape corporate strategy. We engage with companies on climate change, asking them to set goals and report on how they are mitigating climate risks. That transparency will ensure that climate risk is appropriately priced by the market,” Buckley said in an interview with the FT.

Companies with large carbon emissions today can play an important role in the transition to a low-carbon future, he added.

“Our mission is to maximize total long-term profits for our clients. Climate change is a physical risk, but it is only one factor in investment decisions. There is already a pension crisis and we have to make sure that climate concerns don’t make that worse,” Buckley said.

The financial impact of climate change appeared in the headlines recently after HSBC senior executives accused central bankers and policymakers of risk exaggeration of global warming.

Buckley’s comments come ahead of the publication of Vanguard’s first progress report towards the goal achieved net zero carbon emissions in its portfolio by 2050.

Just $290 billion, or 17%, of Vanguard’s $1.7 billion in actively-managed assets will be net zero adjusted by 2050. It expects this number to grow to 50% by 2030. , an agreed interim target date has been set for the members of the Net Zero Asset Manager Initiativea consortium of 235 major investors that collectively manage about $57.5 billion.

But Vanguard chose not to attach temporary net zero targets to the passive index-tracking funds that make up the majority of its assets. The company has said that this is because net zero goals are not built into these funds’ original goals. U.S. asset managers also have a fiduciary duty to maximize returns, so adding other goals not included in the fund’s prospectus could expose them to regulatory challenges. Active managers have more time to decide which factors to use when deciding which companies to buy.

Vanguard also believes that achieving a 50% reduction in emissions in these passive funds by 2030 will be very difficult without significant action by the companies themselves and much greater clarity on how their own policies are to be. government can grow.

“More than 70% of Vanguard’s equity assets are invested in companies with publicly disclosed emissions reduction targets. Buckley said more than $1 trillion of that wealth is invested in companies that have committed to net zero goals.

Environmental campaigners argue that none of the world’s three biggest asset managers – Black stonesVanguard and State Street – have policies that will achieve absolute reductions in carbon emissions by the end of the decade.

Vanguard ranked last out of 25 major asset managers in a review of fossil fuels and climate change published by Reclaim Finance and Urgewald, two environmental advocacy groups, in April.

“Asset managers need to send clearer signals to the fossil fuel industry. Any investor committed to being carbon neutral by 2050 must immediately stop all investments in companies developing new oil and gas supply projects,” said Lara Cuvelier from Reclaim Finance.

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