Is This Beginning of End of ESG? - Vanguard Yanks Its Funds from $59-Trillion Net Zero Asset Management Initiative

Vanguard is the global number-one or number-two in asset management. Therefore, its investment strategies and actual decisions can establish trends. One of those being set in play could be a rethinking of ESG everything. No longer would it necessarily be on the side of the angels. 

Vanguard could be kicking that off with the move to pull its funds out of the $59 trillion Net Zero Asset Management Initiative. That is focused on the Paris Agreement about emissions and is part of the UN-affiliated Glasgow Financial Alliance for Net Zero. The decider in this is Vanguard head Tim Buckley. In The Wall Street Journal opinion piece, Terrence Keeley, author of "Sustainable Investing: Moving Beyond ESG to Impact Investing," salutes that decision.

Buckley's rational is based on an investment fundamental: What's the return? He documents that ESG investing does not have any advantage in broad-based investing. 

The implications are huge. Money is the loudest voice in the room, goes the old saying. The booming sound could and probably will reach the ears of decision-makers in myriad other sectors beyond finance.

ESG has been a platform for what has been called "virtue signaling." That is the messaging by organizations and individuals that they are good global, national, and local citizens. 

That platform could become wobbly. To provide evidence that they are on the side of right institutions and people might establish other new platforms or increase participation in existing ones such as philanthropy and hands-on initiatives such as volunteering for the Girl Scouts or doing service in a 12-step support group.

When Paul Weiss chair Brad Karp created the first-ever ESG practice in a US law firm it seems he anticipated the confusion precipitated by the attempt to impose ESG values on whatevers. The focus was and remains wide-reaching, including investor issues. Here is an excerpt from the description of the service: 

"Our [ESG] advisory practice helps companies navigate the legal, business and political ramifications of developing and implementing ESG initiatives. We advise on matters such as stakeholder engagement, corporate governance, crisis management, corporate social responsibility, sustainability, diversity and inclusion, ethics and compliance."

Currently law-firm clients might require even additional guidance. That could involve how to decouple from an explicit ESG ethos, ranging from the statement of corporate values to initiatives intersecting with politics. Also what would be the messaging to investor activists, both those pushing for and those pushing against ESG agendas. 

In my human-resources communications for organizations I warn that the rhetoric about the right thing to do is changing. They have to see many of the sensitive issues through new lenses.

Intuitive career coaching about your present and your next. Shut down the noise from that committee in your head and open to possibility.  In addition, Jane Genova is an award-winning writer on Human Resources issues.

Whether you need guidance or that your organization’s story be told, please make an appointment for a complimentary consultation at janegenova374@gmail.com or text 203-468-8579.