- Thomson Reuters
- Vanguard, the world’s largest provider of mutual funds, is pushing companies to disclose the risks climate change poses to their business.
- Vanguard is a top shareholder in many large US corporations, so it can impact how companies are run at high levels.
- It’s a sign that investors are taking climate risks seriously.
The world’s largest mutual fund provider is pushing companies to disclose the risks climate change will pose to their business.
Vanguard, which is also the second largest provider of exchange-traded funds, manages trillions of dollars. It’s often a top shareholder in the largest US corporations – including Apple and Exxon Mobil – which means that Vanguard can impact how these companies are run at high levels.
Rob Main, who sits on Vanguard’s investment stewardship team, told Yale Climate Connections on Monday that the firm is especially urging companies in industries like energy and agriculture to identify and disclose areas where climate change will pose a threat.
“For many companies across sectors like the material sector, the energy sector, the industrial sector, the topic of climate risk is going to be very relevant,” Main said, since environmental and policy changes can significantly impact those companies’ performance.
Vanguard’s push is yet another sign that the investment community is taking climate change seriously.
“Given our duty to steward our shareholders’ long-term investments, we must be aware of this risk, where it’s most relevant, and ensure companies are addressing it in an appropriate manner,” Main said.
Generation Investment Management, a firm cofounded by former Vice President Al Gore and David Blood, has a similar outlook. Blood previously told Business Insider that thinking in terms of sustainability is “a terrific risk-management tool.”
“If you’re more holistic in terms of how you are analyzing management quality and business quality, chances are better – although not guaranteed – that you will be able to identify the types of risk that can hurt a company badly,” Blood said.
Glenn Booraem, the principal on Vanguard’s investment stewardship team, told Reuters that the fund’s support for disclosing climate risks isn’t a matter of “ideology,” but rather economics.
“To the extent there are significant risks to a company’s long-term value proposition, we want to make sure there is long-term disclosure of those risks to the market,” Booraem said.
Despite that stance, Vanguard has so far failed to back climate-change resolutions that shareholders put forward at 14 companies and has only backed two, as the Financial Times noted in October.