Finance & Tech

Tell Vanguard’s new CEO it's time to lead on climate!

Vanguard is lagging on climate: It’s the top fossil fuel investor and is failing to hold companies accountable on their climate and sustainability impacts.

Vanguard is the second-largest asset manager in the world, managing almost $8 trillion on behalf of 50 million investors, including tens of millions of people saving for retirement. Asset management companies, such as Vanguard, manage the investments and retirement savings of pensions, corporations, and everyday Americans like us.

Given Vanguard’s size, how the company invests its funds has a big impact on whether we will reach global climate goals. For those of us who are Vanguard clients – anyone who has a pension, 401(k), or savings plan managed by Vanguard – these actions to address the climate crisis will impact not just our financial goals, but our entire future security.

Unfortunately, Vanguard has been failing on climate: it is the biggest investor in fossil fuel companies and has among the worst records for holding companies accountable on their climate and sustainability impacts.

But that could change. Vanguard just announced a new CEO, Salim Ramji, who has an opportunity to steer the company in a new direction. It’s imperative that Vanguard focuses on responsibly managing the risks of climate change. To do that, Ramji needs to hear from us.

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Urgent Call for Vanguard’s New Leadership to Prioritize Climate Risk Management

Dear Mr. Salim Ramji,

cc: Members of Vanguard’s Board of Directors

Welcome to the Vanguard team. I am writing to express my sincere hope that you will use your leadership at Vanguard to steer the company in new and strategic directions. In particular, I strongly encourage you to take seriously the task of adopting new and better strategies to manage and mitigate the multifaceted risks that climate change poses to our portfolios, in order to protect the funds I’ve entrusted to you and Vanguard’s future.

Climate change poses a growing threat to my retirement savings and millions of your other current and future clients. Leading global financial institutions, including Vanguard, have forecasted unprecedented impacts to the global economy from climate change, with cumulative losses to the global economy modeled as high as 25% by mid-century.

Many of the world’s largest pension funds have acknowledged that failure to address climate change will “threaten investors’ long-term ability to sustain value and generate ongoing returns for their beneficiaries over decades.” John Galloway, Vanguard’s Global Head of Investment Stewardship, has himself expressed, “Climate change represents a profound, fundamental risk to investors’ long-term success.”

However, Vanguard has fallen far behind in terms of managing and mitigating systemic risks, like climate change, which threaten overall market performance. Vanguard prides itself on its index investing strategy, which has helped clients like me access more affordable investment vehicles. It’s a strategy that applies to 80% of the client assets managed by Vanguard.

By their very nature, index funds are long-term investments that are broadly diversified to “capture the return that the market provides,” characteristics which make index fund investments disproportionately exposed to the systemic risks of climate change. Because of this, my diversified investments with Vanguard are especially exposed to climate risks, and I am concerned that failure to mitigate these risks will have damaging consequences for my long-term savings.

As one of the world’s largest asset managers, Vanguard is well positioned to be at the vanguard of investors responsibly managing for – and working to mitigate – systemic risks. Through proxy voting, corporate engagement, fund offerings, and working with clients to shift their investment strategies, Vanguard can make necessary changes to its investment and stewardship approaches to mitigate growing systemic risks and protect its clients’ investments.

Undertaking these changes requires reckoning with the fact that the systemic risks posed by climate change (and other systemic risks, like biodiversity loss, artificial intelligence, and economic inequality) are unprecedented and, whether directly or indirectly, will have escalating consequences for all financial market actors.

Meeting the challenges of the 21st century requires moving away from 20th century thinking about investment risk management; it requires understanding the risks that climate change poses to both individual companies and portfolios as a whole, having a strategy to manage and mitigate those risks in long-term and passively managed funds, developing a vision to navigate a set of new and evolving risks, and having a team that is eager and able to meet these challenges.

As a fiduciary, it is your duty to steward your clients’ investments – including my investments – responsibly. Failing to do what is in your control to mitigate risks to your clients’ assets is arguably a violation of your legal obligations. As many other clients before me, I am voicing my concern about Vanguard’s failure to do this under Tim Buckley’s tenure, and my hope is that as the new CEO, you will take action to help safeguard my financial future.

I urge you to steer Vanguard in a new direction and put climate risk at the forefront of Vanguard’s risk management strategies.