Vanguard has launched its first actively managed environmental, social and governance (ESG) fund, the Global ESG Select Stock Fund (VEIGX), which is now accepting investments during a two-week subscription period concluding on 4 June, 2019, when it is expected to begin trading.
The fund’s advisor, Wellington Management Company, will focus on enhancing long-term returns and controlling risks by focusing on ESG practices that can materially impact shareholder returns. The firm will employ an active portfolio integration strategy that will identify and select about 40 companies that demonstrate exemplary, long-standing ESG practices, strong business fundamentals and prudent capital allocation. To fully align the fund’s corporate governance responsibilities with its investment mandate, Wellington Management will also be responsible for voting and engagement activities for the fund.
Intended to be used within an existing diversified portfolio, the fund 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 the fund may not be ideal for investors seeking to exclude particular sectors or companies involved in activities that are at odds with their individual values.
Offering both Admiral Shares (minimum initial investment: USD50,000) and Investor Shares (minimum initial investment: USD3,000), the Global ESG Select Stock Fund is expected to have expense ratios of 0.45 per cent and 0.55 per cent, respectively. By comparison, the average asset-weighted expense ratio of actively managed funds labeled as socially conscious by Morningstar is 0.71 per cent.
