The Vanguard Group will soon begin offering its first actively managed fund based on environmental, social, and governance criteria.
The Vanguard Global ESG Select Stock Fund, which will be managed by Wellington Management Co., will open for investment mid-year, according to a statement Thursday from Vanguard. Wellington will aim to beat the FTSE All-World Index, a benchmark covering a majority of developed and emerging markets.
Vanguard is known for low-cost passive investing strategies, including index-based ESG funds that use exclusionary screening. The new actively managed fund will integrate proxy voting and company engagement, possibly holding stocks that some exclusionary ESG strategies would block from their portfolios.
“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,” Matthew Brancato, head of Vanguard’s portfolio review group, said in the statement.
Wellington senior managing directors Mark Mandel and Yolanda Courtines will run the fund, seeking to invest in companies that have strong business fundamentals. The equity fund “may not be ideal for investors seeking to avoid investing in particular sectors or companies involved in activities that are at odds with their individual values,” Vanguard said.
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The new fund will be relatively inexpensive for investors, with expense ratios of 0.45 percent or 0.55 percent, depending on the share class, according to the statement. Actively managed funds labeled as socially conscious by Morningstar have a higher average asset-weighted expense ratio of 0.69 percent, Vanguard said.
Last year, the firm launched two passive funds investing in companies screened for certain environmental, social, and governance criteria: Vanguard ESG International Stock ETF and Vanguard ESG U.S. Stock ETF. The U.S.-focused exchange-traded fund had a 0.12 percent expense ratio in September, while the ESG International Stock ETF charged 0.15 percent, according to information on Vanguard's website.