… Out of the remaining three ETFs, the best Vanguard sustainble ETF is Vanguard ESG International Stock (VSGX) . At the YGW Rank, we place Vanguard SRI European Stock Inst EUR below iShares European ETFs. Not an investment advice: The information provided on this website is intended for general information purposes only and does not constitute investment advice, financial advice, trading advice, or any other sort of advice. MSCI ESG is a Registered Investment Adviser under the Investment Advisers Act of 1940. Published by Fernando on July 2020July 2020, Home | ESG | Vanguard ESG ETFs Review – Not as Sustainable as You Might Expect. Have violations of labor rights, human rights, anti-corruption, and environmental standards defined by UN Global Compact Principles. VGSESAG has a high Global Rank percentile (93th), however, this is expected from stocks and ETFs with European coverage, where ESG criteria are more established. However, this fund does not exclude fossil fuel companies, resulting in 4.1% of its revenues coming from brown energy sources and, consequently, a carbon intensity of 154 tons CO2e/M$ sales. You are welcome, Helena. You should conduct your due diligence and, if necessary, consult a qualified independent financial advisor before making any investment decisions. How Does Vanguard Sustainable ETFs Compare to iShares? The five Vanguard ESG ETFs and mutual funds are: At the table below we include more details, such as ESG strategy, geographic coverage and domicile: Note: Vanguard FTSE Social Index Fund Admiral Shares (VFTAX) the largest ESG fund from Vanguard with USD 7.9 billion AUM that tracks FTSE4Good US Select Index is a mutual fund managed by Vanguard Admiral and not an ETF. Our ESG funds invest in stocks and bonds with differing investment styles and objectives. Vanguard ESG U.S. Stock ETF ESGV As of December 31, 2020 Investment approach •Seeks to track the performance of the FTSE US All Cap Choice Index. As a signatory to the United Nations-supported Principles for Responsible Investment, we encourage companies to conduct business in a socially conscious way. ", Conservation & protection of the natural environment, Relationships with employees, suppliers, clients & communities, Standards for company leadership, risk controls & shareholder rights. Thus far, Vanguard appears to have been more reserved with this fund becoming only its third ESG ETF following the launch of the Vanguard ESG US Stock ETF (ESGV US) and Vanguard ESG International Stock ETF (VSGX US) in September 2018 – ETFs which now house in excess of $3 billion collectively. Which sustainable or ESG ETFs does Vanguard offer? There are about 100 ESG ETFs available now, which is about 20% more than 18 months ago. Learn everything you need to know about Vanguard ESG US Stock ETF (ESGV) and how it ranks compared to other funds. We’re pleased to announce that Vanguard ESG U.S. Corporate Bond ETF (VCEB) is now available. U.S. investor assets in ESG fixed income mutual funds and ETFs doubled in 2019 to $850 million, and today, stands at $1.8 billion. Exclusionary. Discover funds that reflect what matters most to you, United Nations-supported Principles for Responsible Investment, unglobalcompact.org/what-is-gc/mission/principles. Over the long term, we believe our ESG products are enduring investment options for anyone interested in aligning their values with their fund selections. Vanguard filed a preliminary registration statement with the Securities and Exchange Commission to launch Vanguard ESG U.S. Corporate Bond ETF. Some investors believe ESG investing means sacrificing returns. Vanguard has a dedicated page about ESG investing where they elaborate on the reasons behind ESG investing, list some of their products, and describe different ESG strategies. It includes negative screenings in three product categories and two conduct categories: The product-related screening category covers: The conduct-related screening category covers: Despite mentioning in their Ground Rules report that FTSE Choice Index “takes into account ESG factors in its index design”, it is not clear if or how those are implemented into the Choice Index Series. Health care, education, and housing services. VSGX have a decent MSCI ESG Rating of ‘A’ and Global Rank position (above 70th percentile). In addition, 125 organizations produce research on the ESG investment landscape. *, Source: Morningstar Direct. Vanguard is clear stating that the index is composed of stocks that are: “screened for certain environmental, social, and corporate governance (ESG) criteria by the Index sponsor, which is independent of Vanguard.”. About Vanguard ESG US Stock ETF Vanguard ESG US Stock ETF is an exchange-traded fund incorporated in the USA. Contact us. This means that Vanguard, or the index sponsor, is not practicing inclusionary strategies nor ESG integration. mutual funds), however, domiciled at different locations. If you are new to Your Green Wealth, read the article where we evaluate iShares most sustainable ETFs. ESG investing, which typically assesses the factors listed below, offers a way for you to invest in funds that consider environmental, social, and governance issues. ‘YGW rank’ is an internal assessment from Your Green Wealth and is intended to be an indicative ranking based on sustainability KPIs from MSCI Fund Ratings. Data as of July 31, 2020. This Read more…, Reading Time: 7 min Ads: Resource scarcity is a growing global concern. Thanks for the feedback! Investing in sectors or companies with higher ESG ratings than their industry peers or other investment opportunities. ), iShares MSCI World ESG Enhanced UCITS ETF USD (Acc/Dist), iShares MSCI World ESG Screened UCITS ETF USD (Acc/Dist(, iShares MSCI Europe ESG Enhanced UCITS ETF, iShares MSCI Europe ESG Screened UCITS ETF, Vanguard ESG International Stock ETF (VSGX), Vanguard SRI European Stock Inst EUR (VGSESAG), Vanguard ESG Developed World All-Cap Equity Index (VAEIAGI), Vanguard ESG Emerging Markets All-Cap Equity Index (VAEAIIE), Non-Renewable Energy (Fossil Fuel and Nuclear Power), Vice Products (Adult Entertainment, Alcohol, Gambling, and Tobacco), Weapons (Chemical & Biological Weapons, Cluster Munitions, Anti-Personnel Landmines, Nuclear Weapons, Conventional Military Weapons, and Civilian Firearms), Controversies (based on the UN Global Compact Principles). When not writing for Your Green Wealth, he is a business developer for renewable energy projects. Despite its bad MSCI ESG Rating of ‘BBB’ and terrible Global Rank, it has a low carbon intensity and low number of holdings with controversies. You may hear the term used interchangeably with "socially responsible investing (SRI)" and "sustainable investing. Buy a Vanguard ETF; Open your account online We're here to help. When comparing more broad ETFs, with global coverage, Vanguard sustainable ETFs are at a clear disadvantage. *Source: Morningstar Direct. Are involved with fossil fuels such as thermal coal, oil, or gas. Sustainable investors need to wisely select Water and Ocean ETFs that are sustainable and focus on efficient use of water supplies, and conservation of marine ecosystems. , Vanguard ESG US Stock ETF (ESGV) By focusing only on exclusions, Vanguard has missed the mark with its new environmental, social, and governance exchange-traded funds. For more than 45 years, we've taken a stand for all investors while advocating for improved corporate governance in the market. Despite its huge success as an ETF provider, Vanguard lags behind its main competitor BlackRock, when the subject is sustainable ETFs (exchange-traded funds). We work to ensure public companies act and operate in a way that creates long-term value for fund shareholders. For investors in the United States, there are more than 600 ESG funds and ETFs (exchange-traded funds) available, representing $161 billion in assets under management. Investment managers and investors now have more information on how ESG factors affect companies, allowing them to make better decisions. Violate certain standards defined by the Index provider's ESG controversies assessment. Moreover, FTSE ESG Ratings are not disclosed at the index fact sheet. Example: Ruling out companies that manufacture or sell tobacco or guns. As an example, we can see that FTSE US All Cap Choice Index, the reference index for Vanguard ESG U.S. Stock ETF (ESGV), excluded only 17% of the holdings and has the same Top 10 holdings as its “non-Choice” counterpart (FTSE USA All Cap). Fernando created Your Green Wealth to help investors find sustainable investing options. Example: A mining company that's inherently risky environmentally but ranks high on managing the environmental impacts of its products and services. The ESG ETF provides investors access to the U.S. corporate bond market and expands Vanguard’s current index-and-actively-managed ESG offerings. *For more information, go to unglobalcompact.org/what-is-gc/mission/principles. The index, which is market-capitalization weighted, is composed of large-, mid-, and small-cap stocks of companies located in the United States that are screened for certain environmental, social, and corporate governance (ESG) criteria by the index sponsor, which is independent of Vanguard. Despite its huge success as an ETF provider, Vanguard lags behind its main competitor BlackRock, when the subject is sustainable ETFs (exchange-traded funds). Explore how ESG funds can play a valuable role in your portfolio. Vanguard ESG U.S. Stock ETF ESGV is one of the cheapest and best-diversified U.S.-focused socially conscious funds around. Examples: Fundraising for charitable organizations or donating to the organizations to impact a specific cause, public activism, encouraging action at a local level, and directly communicating with a company or policymaker. The only visible benefit of FTSE US All Cap Choice Index is a reduction of 2.6% in the allocation to the Oil & Gas sector and an increase of 4.1% in allocation to the Technology sector. Produce civilian, controversial, and conventional weapons. Vanguard ESG U.S. Stock ETF has an MSCI ESG Fund Rating of BBB based on a score of 5.02 out of 10. We currently have one active fund with an integrated strategy that includes companies making strides toward ESG practices. Vanguard has been managing ESG investment products for over 20 years, starting with our FTSE Social Index Fund, which launched in 2000. Operate gambling facilities or produce Genetically Modified Organisms (GMO). Vanguard's first ESG offering, Vanguard FTSE Social Index Fund, was launched in 2000 and is the largest ESG index fund in the U.S. 1 Two more U.S.-domiciled index offerings, Vanguard ESG U.S. Stock ETF and Vanguard ESG International Stock ETF, were launched in September 2018. Data as of July 31, 2020. Inclusionary. Vanguard ESG ETFs strategy is limited to excluding compaines in controversial businesses (exclusionary apprach), instead of prioritising companies with high ESG ratings (inclusionary approach). While iShares implements ESG integration by selecting the companies with the best ESG ratings, Vanguard’s approach to ESG investing is only exclusionary, mainly excluding stocks of certain companies that have operations in controversial industries. WANT SOME ADVICE? Vanguard’s most recent funds, VAEIAGI and VAEAIIE, have received MSCI ratings of ‘A’ and ‘BBB’ . Currently, Vanguard offers globally five sustainable ETFs (incl. Free ratings, analyses, holdings, benchmarks, quotes, and news. •Market cap weighted index composed of large-, mid-, and small-capitalization stocks. Sustainable investors need to wisely select Forestry and Agriculture ETFs that are sustainable and focus on efficient management of our forests, production of food and agriculture This Read more…, Vanguard ESG ETFs Review – Not as Sustainable as You Might Expect, Click to share on Facebook (Opens in new window), Click to share on Twitter (Opens in new window), Click to share on LinkedIn (Opens in new window), Click to share on WhatsApp (Opens in new window), Click to share on Pocket (Opens in new window). We've offered an ESG mutual fund, Vanguard FTSE Social Index Fund (VFTAX, Admiral Shares; VFTNX, Institutional Shares), since 2000. Looking at ETFs with European coverage, we encounter a similar situation. We have a full article about iShares sustainable ETFs and their sustainability KPIs. This strategy doesn't require the fund to rule out any company, industry, or country simply because it's involved in a business activity that may be objectionable to some. To put things in perspective for this review we need to benchmark each Vanguard ESG ETF against the market. Have questions? If sustainable investing is a new concept for you, go check out our guide on How to Become a Modern Sustainable Investor in 5 Steps. For investors in the United States, there are more than 600 ESG funds and ETFs (exchange-traded funds) available, representing $161 billion in assets under management. Again, the only benefit of ESGV ETF is its low carbon intensity. Despite launching two new ESG ETFs, Vanguard’s approach to ESG and sustainable investing is mainly exclusionary, instead of inclusionary or integratory. Using resources to positively influence corporate behavior on ESG-related issues. Thanks for reviewing the ESGs-I found the post helpful. This strategy does not promote companies that are making a difference, and consequently, improving their ESG performance. opens new window 2020 Investment Stewardship Annual Report Vanguard's Investment Stewardship team actively engages with portfolio companies and their boards to discuss material risks, ranging from business and operational risks to environmental and social risks. Example: Investing in companies developing renewable energy sources. When we dig deeper into Vanguard’s ESG ETFs we can see that most of their products, which are passive investments, are following a reference index. Despite Vanguard ESG International Stock (VSGX) being the most sustainable ETF among the Vanguard ESG ETFs, its sustainability performance is limited. **This also excludes any company that FTSE determines has a primary business activity in: (a) the exploration and drilling for, as well as producing, refining, and supplying, oil and gas products, (b) the supply of equipment and services to oil fields and offshore platforms, (c) the operations of pipelines carrying oil, gas, or other forms of fuel, (d) integrated oil and gas companies that provide a combination of services listed in (a)-(c) above, including the refining and marketing of oil and gas products, or (e) the exploration for or mining of coal. Vanguard ESG U.S. Stock (ESGV) is the second best option. We're committed to investing in our workplace, supporting our local communities, and developing investment products, services, and infrastructure to serve our clients' interests. Most of our funds are indexed and follow an exclusionary strategy that omits companies that don't meet certain ESG criteria. * Source: Morningstar Direct. MSCI ESG Research LLC’s (“MSCI ESG”) Fund Metrics products (the “Information”) provide environmental, social and governance data with respect to underlying securities within more than 23,000 multi-asset class Mutual Funds and ETFs globally. Disclaimer: This website may use affiliate links. Adding to that, ESGV top holdings have Read more…, Reading Time: 7 min Ads: Resource scarcity is a growing global concern. If you are looking for sustainable ETFs, iShares ESG ETFs are still a better option, with a full portfolio of ETF options at different geographic coverage and different levels of ESG integration. Vanguard takes seriously its responsibility to represents the interests of more than 30 million people who invest in Vanguard funds. However, it’s ESG performance is not great, being the best factor its MSCI Global Rank. In the tables below we do a quick reivew of the top two ETF providers, Vanguard and iShares, on a side-by-side comparison, using MSCI Fund Ratings to assess which is the most sustainable ETF: When comparing sustainable ETFs that cover the US, we can see that even the 2nd most sustainable ETF from Vanguard in the US, ESGV ETF, is well below iShares SUAS, EDMU and SASU ETFs in MSCI Global Rank percentile. ESGV | A complete Vanguard ESG US Stock ETF exchange traded fund overview by MarketWatch. Since each fund is different, always pay close attention to its strategy and approach when making investment decisions. Example: The portfolio manager chooses to include the stock of a well-performing energy company that is thoughtfully navigating the transition from fossil fuels to sustainable resources. Produce alcohol, tobacco, adult entertainment, or nuclear power. Vanguard is the second-largest provider of exchange-traded funds with USD 6.2 trillion in assets under management (AUM). But the ESG groundswell among ETF investors has been especially significant during the past year. It's now the largest ESG-screened index fund in the United States.*. Out of five funds, Vanguard SRI European Stock Inst EUR is the best performer with an ESG rating of ‘AA’ and a Global rank at 93th percentile. ESG funds are subject to ESG investment risk, which is the chance that the stocks or bonds screened by the index sponsor for ESG criteria generally will underperform the markets as a whole or that the particular stocks or bonds selected will, in the aggregate, trail returns of other funds screened for ESG criteria. WANT TO LEARN MORE? View the latest ETF prices and news for better ETF investing. Easily browse and evaluate ETFs by visiting our Responsible Investing themes section and find ETFs that map to various environmental, social and governance themes. 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