Eight Quaker climate activists were arrested Wednesday after protesting at Vanguard's main headquarters in Malvern, Pennsylvania. The group sought a meeting with the investment company's stewardship executive, while drawing focus to the firm's record on environmental issues.
"We still haven't seen Vanguard hold companies accountable," said Christina Tavernelli, program manager with Quakers' American Friends Society. "BlackRock has a coal-exclusion policy, while Vanguard does not."
Together, BlackRock, Vanguard, and State Street manage roughly $20 trillion and vote at least 25% of shares across the S&P 500. This gives the firms an outsized influence to shape corporate behavior, according to Earth Quaker Action Team, known as EQAT, a group of climate activists based in Philadelphia.
EQAT hopes to see Vanguard better integrate climate justice into their business decisions, including phasing out investments in companies that rely on coal, excluding fossil fuels from investments, and committing that 100% of the money they manage will go toward zero-emissions by 2050.
Investment portfolios are the latest political football. Trillion-dollar asset managers are now targets of both left- and right-leaning political activists. Progressives claim firms managing trillions of dollars in assets should push the underlying portfolio companies harder to address climate change; political conservatives, meanwhile, claim that doing so could hurt returns for mom-and-pop retirees, who are trying to save as much as possible.
A mixed bag for investment firms
The reality of ESG investing — an acronym for environmental, social and governance issues — is complicated. Each firm claims a varying level of commitment to climate policy.
To sort through the noise, a nonprofit called As You Sow runs a free database called FossilFreeFunds.org that ranks all funds on Wall Street by environmental measures. Some Vanguard funds rank very highly — such as the Vanguard Real Estate ETF, which earned an "A" grade — while others in the index fund category receive low or even "F" grades.
"Vanguard is known for being this very large index provider, which doesn't actively stock pick companies in their indexes," said Daan Van Acker, program manager for InfluenceMap, an international firm that compiles data on how business and finance are influencing climate issues. "As a result, stewardship isn't a focus."
Stewardship is the use of influence by institutional investors to maximize overall long-term value. Activists have expanded that to include common economic, social and environmental factors.
When compared to Vanguard, BlackRock's CEO and stewardship staff "have been more vocal (on climate issues). BlackRock in recent years has published case studies that are available for anyone to read," Van Acker said.
"Vanguard claims to have engaged on climate issues but not specifically on the process or the outcomes," he said. "Fidelity is a little worse. They don't do much around climate at the moment."
InfluenceMap gave BlackRock a grade of "B"-minus, Vanguard a "C", and Fidelity a "D" for engagement with climate issues.
Pushback by both sides
EQAT's action Wednesday wasn't its first. In April, the group pressured Vanguard with a weeklong march highlighting its holdings in coal, oil, gas, and other polluting industries as "a major driver of climate destruction and environmental racism."
Groups such as EQAT want Vanguard to phase out thermal coal from all portfolios, with a priority on any firms still expanding coal mines or coal power capacity. Conservatives want hands off, said Van Acker.
And conservatives now are waging their own battle against what they allege is "woke" portfolio management, a direct response to such groups as EQAT.
In August, a group of more than a dozen attorneys general in Republican-leaning states signed a letter to BlackRock's CEO Larry Fink, suggesting that changing portfolios based on climate change inherently prevented shareholders from the best returns.
BlackRock "appears to use the hard-earned money of our states' citizens to circumvent the best possible return on investment," the letter stated. "BlackRock's past public commitments indicate that it used citizens' assets to pressure companies to comply with international agreements such as the Paris Agreement."
BlackRock was first out of the gate marketing ESG investing, said University of Delaware professor Charles Elson, who edits the magazine Directors & Boards.
Elson, however, doesn't think the investing firms should be moved by political causes. "Using other people's money to further a position you find appealing is problematic," he said.
"Coal is still legal in this country. A retirement plan's obligation is to maximize the value for those who invest," he continued. "Once it becomes a tool to promote social change, the corporation is the wrong place for that. It should be happening at the governmental level."
Looking ahead
Vanguard in August said 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 deemed by the fund's adviser to contribute positively 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 being charged, said EQAT spokeswoman Eileen Flanagan.
Reflecting on Vanguard's new ESG funds, Flanagan said: "That's positive, but it's not stewardship. It's not what they pledged: to engage with companies to mitigate climate change. ESG funds don't take the place of using their influence at Exxon to change course."
Vanguard did not respond to requests for comment on Wednesday's events.
