On May 21, 2019, Vanguard launched its Global ESG Select Stock Fund (VEIGX/VESGX). The fund is subadvised by Wellington Management. It is Vanguard’s fourth socially-screened product after FTSE Social Index (VFTSX), ESG U.S. Stock ETF (ESGV) and ESG International Stock ETF (VSGX). Vanguard funds sponge up money pretty promptly: Social Index, launched in 2000, has $5.6 billion but the domestic and international ETFs are under a year old and have gathered $570 million and $380 million, respectively. Morningstar likes them all.
Matthew Brancato of Vanguard claims the 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.” Two distinctions suggest themselves:
- it’s going to be a concentrated portfolio. The target is “approximately 40 global companies that it believes demonstrate exemplary long-standing ESG practices and have strong business fundamentals and management teams.” Morningstar’s Jonathan Hale suggests that the fund will be “a virtual clone” of Wellington Global Stewards, a fund for European investors which launched in January 2019 with the same two managers and which holds 38 stocks.
- the managers are responsible for improving governance in the firms represented in the portfolio. The managers “will be responsible for governance activities for the fund. This will enable [them] to fully integrate proxy voting and company engagements into the fund’s investment strategy.” One of the managers has already said, “We intend to own these companies long-term and engage with company management and boards on their business strategies and ESG practices.”
The managers in question are Mark D. Mandel and Yolanda Courtines. Mr. Mandel has a B.A. from Bates College and an M.B.A. from Dartmouth. He joined Wellington in 1994 as a global analyst and rose to become director of global industry research. Ms. Courtines has a B.A. from Tulane and an M.B.A. from Columbia. She is based in London, a member of the investment stewardship committee and has been working at Wellington for 12 years. Both have earned the CFA charterholder designation, which is a major accomplishment for any investor, and both claim to have worked in the investment industry since the mid-1990s. That said, their portfolio management experience begins in January 2019. Wellington Management has an extensive and active commitment to ESG investing in general, and toward climate change issues in particular. They manage $350 billion for Vanguard, and do it well.
One of Vanguard’s most prominent commentators, Daniel Wiener of The Independent Advisor for Vanguard Investors, is just a bit skeptical of the move toward ESG funds in general. He writes in an email to subscribers,
ESG, ESG, ESG. Good grief. This shiny new toy is everyone’s favorite, or so it seems. To feed the beast I took a look at ESG U.S. Stock ETF and various other Vanguard ESG products. As one expert I read recently said about inclusion in the various ESG indexes, in many cases, ESG scoring by index providers come down to the ability of a company to fill out ESG forms. Sheesh.
He’s a bit more skeptical about Vanguard’s move in this direction:
One longtime Vanguard investor says it’s a marketing move. “Just the way Vanguard jumped on the factor-investing train last year, they’ve jumped whole-hog into the ESG marketplace. This is all about marketing,” says Dan Wiener, editor of the Independent Adviser for Vanguard Investors newsletter and chairman of Adviser Investments, a wealth management firm with $5 billion in assets. “It’s a very different thing than what Jack Bogle used to do. He was not driven by the same kind of marketing incentives that Vanguard is driven by today.” (Vanguard’s New ESG Fund: 40 Stocks And A Marketing Plan, Forbes, 03/07/2019)
The minimum initial investment is $3,000 for Investor shares and $50,000 for Admiral shares. The Investor shares carry an e.r. of 0.55%, while the Admiral shares come in at 0.45%. The average actively-managed ESG fund, per Morningstar, charges 0.74%. The fund has just under $60 million in assets. Its homepage already has substantial portfolio detail.