Vanguard has announced its withdrawal from the Net Zero Asset Managers initiative (NZAM) in an effort to reassure investors that it “speaks independently” on matters of importance such as climate risks.
The fund manager revealed that it was leaving the multi-trillion-dollar group of investment managers in a December 7 announcement, explaining that the decision was made in order to provide its investors with “clarity… about the role of index funds and about how we think about material risks, including climate-related risks.”
Formed in 2020, NZAM has grown to accommodate nearly 300 companies with $66 trillion in assets under management. Vanguard joined the coalition in March 2021 as one of the largest signatories with more than $7 trillion in assets.
Vanguard explained that its participation in NZAM had caused some confusion about its views regarding the applicability of net-zero approaches to the “broadly diversified index funds favored by many Vanguard investors.” As an asset manager of primarily passive investment funds, more than 80% of its clients’ assets are invested through index funds.
“This change in NZAM membership status will not affect our commitment to helping our investors navigate the risks that climate change can pose to their long-term returns,” the fund manager said. “We will continue to provide investors [with] the information and products they need to make sound investment choices, including products designed to meet net-zero objectives.”