Vanguard to expand ESG offer with active global equity fund

March 7, 2019

 

Vanguard today filed a registration statement with the U.S. Securities and Exchange Commission for the proposed launch of Vanguard Global ESG Select Stock Fund, an actively managed global equity fund that will seek to maximize returns while having greater exposure to companies with attractive environmental, social, and governance ("ESG") characteristics. The fund is expected to be available during the second quarter of 2019.

The Global ESG Select Stock Fund will be managed by Wellington Management Company LLP, and will be the first active offering in Vanguard's lineup of ESG-focused mutual funds and ETFs.

The fund will complement Vanguard's current ESG offerings by providing investors with an active global investment option that emphasizes companies with leading ESG practices. The fund will follow an active portfolio integration strategy. In addition to its investment advisory responsibilities, Wellington will also be responsible for governance activities for the fund. This will enable the fund managers to fully integrate proxy voting and company engagements into the fund's investment strategy.

"The Global ESG Select Stock Fund expands Vanguard's low-cost ESG offerings with our first actively managed fund in the category," said Matthew Brancato, head of Vanguard Portfolio Review Department. "The fund's approach to ESG investing is distinctive in that it seeks long-term outperformance through the selection of companies that integrate leading ESG practices into their corporate strategies."

Several characteristics will distinguish the Global ESG Select Stock Fund from other ESG funds (active and passive) in the marketplace:

  • The fund takes a global approach to ESG investing. Of 280 ESG funds available to U.S. investors, only 42 have global strategies.1
  • The fund has an extended investment horizon, which allows Wellington to select and engage with companies that demonstrate exemplary long-standing ESG practices.
  • The fund is low-cost, which Vanguard research has shown to be a key factor in improving a portfolio's odds of outperformance over time.2

Intended to be used as a concentrated position within a diversified portfolio, the fund is designed for investors who wish to invest in companies with leading ESG programs as identified by Wellington. At times, the fund may hold companies that would be omitted by some exclusionary ESG strategies, so this strategy may not be ideal for investors seeking to exclude particular sectors or companies involved in activities that are at odds with their individual values.

The fund will be managed by Wellington portfolio managers Mark Mandel and Yolanda Courtines, who have each worked in investment management for more than 25 years and have deep experience in ESG-focused research and investing.

Wellington is Vanguard's oldest and largest external advisory partner, managing more than $336 billion on behalf of our clients (as of December 31, 2018). The firm has managed ESG investment strategies (including dedicated impact strategies, environmental-/climate-focused strategies, and diversity-/gender-focused strategies) for more than ten years and currently manages nine strategies in this area. Wellington's dedicated ESG researchers conduct in-depth analysis of the ESG factors considered material to the companies within their sector coverage.

Mark D. Mandel, CFA, joined Wellington in 1994 and previously served as the firm's director of global industry research and as co-portfolio manager of Vanguard Emerging Markets Select Stock Fund. Mr. Mandel earned a B.A. in economics from Bates College and an M.B.A. from the Tuck School of Business at Dartmouth College.

Yolanda C. Courtines, CFA, joined Wellington in 2006 and previously served as a global industry analyst covering the finance sector. She earned a B.A. from Tulane University and a master's degree in international affairs from Columbia University.

The fund will offer both an Admiral share class and an Investor share class, with estimated expense ratios of 0.45% and 0.55%, respectively. The average asset-weighted expense ratio of actively managed funds labeled as socially conscious by Morningstar is 0.71%.3

For nearly 20 years, Vanguard has been offering socially responsible funds to help investors with certain value preferences reach their goals. In fact, Vanguard FTSE Social Index Fund is now the largest ESG-screened index fund in the United States.4 Given our customary deliberate, disciplined process for developing new investment products, we believe expanding our ESG offering will further enhance our low-cost approach and satisfy evolving investor preferences.

1 Source: Morningstar "socially conscious" funds, as of December 31, 2018.

2 Wallick, Daniel W., Brian R. Wimmer, and James Balsamo, 2015. Keys to Improving the Odds of Active Management Success. Valley Forge, Pa.: The Vanguard Group.

3 Source: Morningstar, Inc., as of November 30, 2018.

4 Source: Morningstar, Inc., as of December 31, 2018.

Notes:

  • A registration statement relating to Vanguard Global ESG Select Stock Fund has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
  • For more information about Vanguard funds, visit advisors.vanguard.com or call 800-997-2798 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing. Copies of the final prospectus can be obtained from Vanguard. Please note that a preliminary prospectus is subject to change.
  • All investing is subject to risk, including the possible loss of the money you invest. Investments in securities issued by non-U.S. companies and governments are subject to risks including country/regional risk and currency risk. These risks are especially high in emerging markets. Diversification does not ensure a profit or protect against a loss.
  • CFA® is a registered trademark owned by CFA Institute.
 

Our insights straight
to your inbox

Our insights straight to your inbox

Receive our latest Advisor's Digest
research
and commentary sent the
first business
morning every week.

A weekly digest of our latest research and commentary. Topics include the economy and markets, portfolio strategy, ETFs, and practice management.


Fund openings/closings, fund manager changes, dividend distributions, webinars, and other events you might want to know about.



Already registered? Log on to
manage your
email subscriptions.