Vanguard launches Global ESG Select Stock Fund

May 21, 2019

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Vanguard today launched 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 corporate governance (ESG) characteristics. The Global ESG Select Stock Fund may be appropriate for investors who wish to invest in companies with leading ESG practices, as identified by the fund's advisor, Wellington Management Company LLP. The fund will begin to follow its investment strategy after a two-week subscription period ending June 4.

The Global ESG Select Stock Fund, the first active offering in Vanguard's lineup of ESG-focused mutual funds and ETFs, is available for investment in two share classes. The fund has estimated expense ratios of 0.45% for Admiral™ Shares ($50,000 minimum) and 0.55% for Investor Shares ($3,000 minimum). As of March 31, 2019, the average asset-weighted expense ratio of actively managed funds labeled as socially conscious by Morningstar is 0.74%.¹

The fund is intended to be used in an already diversified portfolio and is designed for investors who wish to invest in companies with leading ESG practices and strong business fundamentals, as identified by Wellington Management. 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.

"Vanguard's new Global ESG Select Stock Fund is taking a distinctive approach to ESG investing, seeking long-term outperformance through the selection of companies that integrate leading ESG practices into their corporate strategies," said Matthew Brancato, head of Vanguard's Portfolio Review Department.

Wellington will rely on the breadth and depth of its investment resources, including a dedicated ESG research team, to integrate ESG opportunities and risks with other investment considerations. Wellington's proprietary research, focused on enhancing long-term returns and controlling risks, seeks to identify leading ESG practices that can materially impact shareholder returns.

Wellington Management has identified and selected approximately 40 global companies that it believes demonstrate exemplary long-standing ESG practices and have strong business fundamentals and management teams with proven track records of prudent decision-making about allocation of shareholder capital. The fund is expected to hold stocks over an extended period, resulting in low portfolio turnover. In addition to investment advisory responsibilities, Wellington Management will 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.

"Our objective in this fund is to outperform the global equity markets by identifying businesses with high financial returns and the ability to sustain them. We seek industry leaders with established competitive advantages and leading ESG practices. We intend to own these companies long-term and engage with company management and boards on their business strategies and ESG practices," said Yolanda Courtines, CFA, a Wellington equity portfolio manager.

In recent years, ESG investing has grown significantly and has attracted a diverse set of investors. Vanguard has offered ESG-focused funds for nearly 20 years, with 11 funds in the U.S., Australia, and Europe totaling more than $8.4 billion in assets (as of January 31, 2019). Vanguard's first ESG offering, Vanguard FTSE Social Index Fund, was launched in 2000 and, as of March 31, 2019, is the largest ESG index fund in the United States.² Two more U.S.-domiciled offerings, Vanguard ESG U.S. Stock ETF and Vanguard ESG International Stock ETF, were launched in September 2018.

Wellington is a stable, world-class investment organization with a client-focused culture and a long history of ESG integration and investing. The firm has managed ESG-focused strategies for more than ten years and seeks to incorporate analysis of ESG factors into many of its investment and risk management processes in pursuit of strong results for clients. Wellington is also Vanguard's oldest and largest external advisory partner, managing more than $363 billion on behalf of our clients (as of March 31, 2019).

¹ Source: Morningstar "socially conscious" funds, as of March 31, 2019.

² Source: Vanguard. Data are as of March 31, 2019.


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