Perspectives : Investment | November 01, 2022

Investing for long-term growth and positive impact

Read time: 10 minutes

One of the criticisms of environmental, social, and governance (ESG) investing is its lack of quantifiability. While many sustainability-minded investors are content to avoid companies or industries that conflict with their preferences, a growing number seek strategies that can deliver strong financial returns and a measurable positive impact on society. 

Vanguard Baillie Gifford Global Positive Impact Stock Fund seeks to deliver on both these objectives. The fund has a dual mandate: to produce attractive financial returns and a measurable positive impact on environmental and social challenges. Unlike many ESG funds, the Baillie Gifford Global Positive Impact Stock Fund managers produce comprehensive annual reporting that documents any positive impact the fund has achieved, in addition to standard financial reporting.

The fund is managed by Baillie Gifford Overseas Limited, an independent investment partnership founded in Edinburgh, Scotland, in 1908. As a growth investing specialist, the firm relies on rigorous fundamental research and decades of institutional knowledge to find exceptional businesses from around the world. Baillie Gifford has worked with Vanguard since 2003, managing $52 billion of assets on our behalf as of March 31, 2022.

Addressing global sustainability challenges

The Baillie Gifford fund management team conducts in-depth, fundamental research to identify companies that offer products and services that can generate long-term value for shareholders and help contribute to sustainability and inclusiveness. The fund managers look to invest in companies that can help support positive change in areas including:

  • Social inclusion and education.
  • Environment and resource needs.
  • Health care and quality of life.
  • Base of the pyramid (i.e., needs of those at the bottom of the global income ladder).
Finding companies that can deliver growth and positive impact

While the universe of companies in which the fund can invest is very large, the managers rely on a clear and consistent set of filters to focus on the relatively small number of businesses that might be of interest to them.

To assemble the portfolio, the fund managers follow a six-step process that includes a fundamental research step and an impact analysis step. Every stock must have the backing of an investment manager and one senior impact analyst. The team considers a company’s investment and impact potential when making portfolio decisions and sizing positions.

The intended outcome of this process is a portfolio of between 25 and 50 growth companies with the potential to outperform the fund’s benchmark over the long term and which the portfolio managers consider to have core ambitions of delivering a positive change. The process can result in significant exposure to a single country or a small number of countries. 

A six-step investment process
Source: Baillie Gifford.
Reporting performance and impact

In addition to standard financial reporting, Baillie Gifford provides an Annual Impact Report which documents portfolio and company-level impact, including the fund’s contribution toward United Nations Sustainable Development Goals.

Reporting on the impact delivered by the strategy holds the fund managers accountable to the fund’s impact objective and helps investors understand the impact their capital is having. The Annual Impact Report presents data on the fund’s impact in key areas, as shown in the examples below.

Snapshot of portfolio-level impact
In 2021, the fund’s portfolio companies were estimated to have:

*CO2e includes CO2 and other greenhouse gases with equivalent global warming potential. CO2e saved is based on company reporting, which is either in CO2 or CO2e; the aggregate data is presented as CO2e as this is the most conservative approach.

**Data related to healthier lifestyles, health care services, including treatment and disease management, and instruments for scientific research are presented to date, covering multiple years.

Notes: Headline impact data, while providing an indication of the impact of the portfolio, is vulnerable to inconsistencies which can be caused by underlying assumptions. How companies measure and report is not always uniform and, in some cases, requires conversion to allow for aggregation across the portfolio.

Source: Baillie Gifford Positive Change Impact Report, for the full year 2021.

A word about patience and active management

Vanguard Baillie Gifford Global Positive Impact Stock Fund’s portfolio is highly concentrated in a relatively small number of holdings. As such, investors should be prepared for the fund’s returns to deviate, at times widely, from those of its benchmark.

As shown in the chart below, for instance, the fund has significantly underperformed its benchmark year-to-date and over one year, but significantly outperformed over three years and since inception (all periods ended September 30, 2022). This high level of active risk is why we believe investors should consider the fund as a potential complement to an already diversified portfolio rather than a core holding.

Succeeding with active strategies requires patience. Vanguard research shows that almost all outperforming traditional active equity managers have frequent periods of underperformance relative to the equity market, some of which are long in duration and large in magnitude.1 Investors with high conviction and tolerance for active risk are more likely to have the patience necessary to endure the inevitable drawdown periods that come with active investing.

Fund performance

On July 18, 2022, the Baillie Gifford Positive Change Equities Fund (Predecessor fund) was reorganized into Vanguard Baillie Gifford Global Positive Impact Stock Fund (Vanguard fund). Historical performance information prior to July 18, 2022, is representative of the Predecessor Fund and is included in the Vanguard fund’s performance history. Baillie Gifford Overseas Limited serves as the sole advisor to the Vanguard fund.

*The expense ratio is as of July 18, 2022.

**Inception date of the Baillie Gifford Positive Change Equities Fund, which was reorganized with and into Vanguard Baillie Gifford Global Positive Impact Stock Fund on July 18, 2022.

Source: Vanguard, as of September 30, 2022.

The performance data shown represent past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so investors' shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.
Learn more about Vanguard Ballie Gifford Global Positive Impact Stock Fund
Download the brochure to see details on the fund’s philosophy, process, reporting, and management team.


For more information about Vanguard funds, visit to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.

All investing is subject to risk, including the possible loss of the money you invest.

ESG funds are subject to ESG investment risk, which is the chance that the stocks or bonds screened by the advisor for ESG criteria generally will underperform the market as a whole or, in the aggregate, will trail returns of other funds screened for ESG criteria. The advisor’s assessment of a company, based on the company's level of involvement in a particular industry or the advisor's own ESG criteria, may differ from that of other funds or an investor's assessment of such company. As a result, the companies deemed eligible by the advisor may not reflect the beliefs and values of any particular investor and may not exhibit positive or favorable ESG characteristics. The evaluation of companies for ESG screening or integration is dependent on the timely and accurate reporting of ESG data by the companies. The advisor may not be successful in assessing and identifying companies that have or will have a positive impact or support a given position. In some circumstances, companies could ultimately have a negative impact, or no impact.

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.