A focus on client outcomes

• Investors should have access to low-cost, high-quality, broadly diversified products that help them meet their financial goals.

• There are many ways to approach environmental, social, and governance (ESG) investing for those who wish to do so. We believe in providing investors with high-quality investment choices designed with the goal of meeting their long-term financial goals and personal preferences.

• Healthy and fair capital markets require effective disclosure of material risks, including material ESG risks, so that markets can price these risks efficiently.

• Vanguard’s consideration of material ESG-related risks and opportunities is driven by each fund’s stated investment strategy and objective.

Vanguard is built to help individual investors reach their financial goals. More than 50 million people around the world have chosen to entrust Vanguard with their hard-earned savings. They have a wide range of investment goals, time horizons, risk tolerance levels, and personal perspectives. Our goal is to help investors maximize their long-term returns and give them the best chance for investment success as they save for their goals, whether it be retirement, a child’s education, a home, or simply a more secure financial future. Vanguard’s unwavering focus on client outcomes informs our approach to responsible investment. 

Vanguard is committed to providing investors with the information and products they need to make sound investment choices that help them meet their financial goals and reflect their personal preferences. We have a disciplined approach to product development, and we offer mutual funds and ETFs with enduring investment merit that are designed to meet the long-term needs of our investors. While this includes a wide selection of traditional funds, we also offer ESG funds that consider material environmental, social, and governance matters through a range of stated strategies and objectives.

Some fund investors also wish to make their voices heard directly through proxy voting associated with their investments. Since 2023, Vanguard has been piloting ways for investors to make their voices heard by enabling them to select from a range of proxy voting policy options. These pilot efforts are currently limited to certain index funds as Vanguard explores ways to make the process more cost-effective and user-friendly. We are committed to advancing investor choice and continue to actively explore ways to empower investors to participate more directly in the proxy voting process.

Vanguard’s product lineup includes both index funds and funds that use active management investment strategies. Collectively, Vanguard investors have chosen to invest the majority of their assets in broadly diversified index funds. By design, index fund managers don’t choose the securities in a fund. Instead, they buy and hold the securities included in the benchmark index and capture the return that the market provides. It’s an approach that has helped build wealth for generations of everyday investors. For index investors who have ESG-related preferences, Vanguard’s exclusionary ESG index products are designed to avoid or reduce exposure to specific industries (such as firearms, tobacco, or fossil fuels) while still seeking to achieve market-like returns.

For investors who seek to outperform market benchmarks, we offer low-cost actively managed funds. Most of our active funds do not have ESG-specific mandates, and most are managed by external investment advisors, separate from Vanguard. The managers of these products have their own approaches to integrating material ESG risks into their investment processes.

Vanguard also offers actively managed funds that have stated ESG-specific mandates. These funds, managed by external advisors, aim to generate excess return by allocating capital to companies that the fund managers assess as demonstrating leading ESG practices consistent with each fund’s mandate.

Vanguard investors select the investments most appropriate for them from our broad range of options based on their individual preferences, priorities, and risk tolerance. Only clients who affirmatively choose ESG funds are invested in these funds. Vanguard does not boycott any company, industry, or sector of the economy. In addition, Vanguard maintains robust policies and procedures to ensure compliance with all applicable laws and regulations, including sanctions laws, related to portfolio company holdings.

For more information about investment products: Mutual funds, ETFs and more

Good corporate governance matters. Well-governed companies should produce higher value for investors over the long term. When portfolio companies generate value over the long term, our funds generate value for Vanguard fund investors. Vanguard’s Investment Stewardship team is responsible for voting proxies and engaging with portfolio companies on behalf of Vanguard-advised funds,¹ including Vanguard equity index funds and ETFs.

The Investment Stewardship team engages with companies about material risks, including material ESG risks, and seeks to understand how boards disclose and oversee these material risks. The funds’ proxy votes are based on the application of clear, publicly disclosed policies as well as procedures overseen by the board of each Vanguard fund. We disclose the funds’ proxy voting policies and how the Vanguard funds vote so that fund investors are aware of how the votes advance their interests in long-term investment value.

The Vanguard-advised funds’ portfolio construction process is inherently passive—the equity index funds seek to track benchmarks determined by independent index providers. Our approach to investment stewardship operates in that context. Accordingly, with respect to companies held by Vanguard-advised funds, we do not seek to dictate strategy or operations, nor do we submit shareholder proposals or nominate board members. We believe that the precise strategies and tactics for maximizing long-term investment returns should be decided by a company’s board of directors and management team. Similarly, Vanguard does not use investment stewardship activities to pursue public policy objectives. We believe that setting public policy, including policy on environmental and social matters, is appropriately the responsibility of elected officials.

For more information about Investment Stewardship: Investment stewardship and corporate governance

Climate change—and the ongoing global response—will have far-reaching economic consequences for companies, financial markets, and investors. Vanguard is committed to understanding and attending to material risks that can erode our investors’ long-term returns, including climate-related risks.  Our approach spans several key areas of focus:

• We provide investors with the information and products they need to make sound investment choices and reflect their personal preferences, including several actively managed ESG products that have net zero objectives.

• We engage with companies held by Vanguard funds to understand how boards of directors oversee material risks; for portfolio companies where climate risk is a material risk, we seek to understand how they disclose², oversee, and mitigate these risks.

• We offer our perspectives to policymakers, who are specifically empowered to address complex societal issues like climate change.

• We publicly report on our efforts with respect to climate risk in line with the broadly accepted recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)³ and grounded in our deep commitment to our investors and their financial well-being.

For more, see Vanguard’s most recent TCFD report: Vanguard’s Report on Climate-related Impacts 2023

External organizations, including those that focus on ESG matters, can advance constructive dialogue on important investment topics. Vanguard may participate in external organizations that align with Vanguard’s mission and our focus on long-term investment outcomes if we believe that doing so advances our objective of helping investors achieve investment success.

We routinely assess participation in external organizations to ensure that involvement continues to align with Vanguard’s mission and investment perspectives and does not conflict with our duties to investors.  In every instance, Vanguard maintains its independence in engagement activities with portfolio companies and in making proxy voting decisions in accordance with the funds’ voting policies and with the goal of promoting long-term shareholder returns. That includes Vanguard’s involvement with any trade association, industry group, or initiative. Vanguard speaks independently on matters of importance to our investors, including responsible investment and climate change.  

Vanguard does not make any commitments to third-party groups that supersede our duty to our investors. Vanguard also does not collaborate with other investors to engage with individual issuers to achieve specific outcomes (including investment, social, or environmental outcomes).  If we determine that an organization’s mandate has changed, or that it no longer aligns with Vanguard’s mission or investing perspectives, or that its strategies or actions create a credible risk of confusion about Vanguard’s involvement or independence, we will reassess our engagement with the organization. Regardless of Vanguard’s membership status in any given organization, our role as an investment manager is to uphold the stated investment objectives of each fund selected by our investors.