Vanguard Investments Australia talks ESG funds

Funds Management

by Jessica Amir

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Vanguard Investments Australia Product Research and Development Manager, Rachel White introduces Vanguard’s approach to Environment, Social & Governance (ESG) screening, its funds and why ESG matters.

Jessica Amir: Hello. I'm Jessica Amir for the Finance News Network. Today I'm with Vanguard Investments Australia Product Research and Development Manager, Rachel White. Hi, Rachel.

Rachel White: Hi, Jessica.

Jessica Amir: Thanks for coming to Melbourne.

Rachel White: Thank you for having me.

Jessica Amir: Thank you. So, first off, for those who aren't really familiar with Vanguard, just give us a quick introduction.

Rachel White: Vanguard is a global asset management firm. We manage over $7 trillion on behalf of our clients. We've been doing this for over 40 years, and over 20 years here in Australia.

The most important aspect about Vanguard is a client ownership structure. So we're owned by the investors in our funds, which truly aligns that interests with our clients and our end investors, which means we can truly focus on lowering the cost of our funds for our investors, be long-term and focus on long-term wealth creation, and be truly client obsessed.

Jessica Amir: Great. So before we talk about your ESG funds, or Vanguard's ESG funds, maybe you could give us a quick introduction to what ESG investing actually is and why it's so important.

Rachel White: So, ESG investing is really an umbrella term about responsible investments, and for a lot of people, it means doing well, but also doing good. There's three key reasons we think ESG investing matters to clients and will continue to be an enduring trend.

The first is around investment rationale. So there's more and more academic research showing ESG to have a neutral to slightly positive impact on company performance.

The second piece is around investor preference. So we're finding that there's more investors that care about responsible and ESG investing, and that's particularly true for female investors and also the younger generations like millennials. Three in four millennials have said they would prefer their investments or super funds to be invested responsibly, than just to maximise investment returns.

And the final one is the environment is more conducive to ESG investing. So there's more indices and more products available to give investors more choice. There's more data and standardisation by companies, and there's more regulation to support the ongoing development of ESG investing.

Jessica Amir: Now let's talk about your funds, the ESG funds that is, what can you tell us about the Vanguard Ethically Conscious International Shares Index fund and its ETF?

Rachel White: So the Ethically Conscious range was built around three key categories and the fund screens out companies involved in these three categories. The first is non-renewable energy. So that's the things like nuclear power and fossil fuels. The second is vice products, so alcohol, gambling, adult entertainment, and then the final screen is around weapons, so firearms and controversial weapons.

These are issues that when we surveyed our clients and we went out and did research, with individual investors and intermediary investors, they said mattered to them and we believe matter to a broad set of Australian investors. The International Shares Fund is a global share fund that invests in businesses across the world, outside of Australia, and provides investors a broad diversified low-cost exposure.

So we offer the product as both a mutual fund and an ETF to give investors the choice of vehicle, based on their preference.

Jessica Amir: Thanks, Rachel. And also in the range, you've got the Global Aggregate Bond Index Fund and ETF?

Rachel White: Exactly. So we've got the Global Aggregate Bond Fund, which is a part of our Ethically Conscious range and applies the same screening methodology as the International Shares Fund, providing access to bonds across the globe at our hallmark investment characteristics of diversified, broad, and at low cost, and again, that product is offered as a fund and also an ETF.

Jessica Amir: And lastly, Rachel, what's your final message to investors today?

Rachel White: I think what I found or we found really interesting at Vanguard is that, this is one of the very few investment trends that has actually led from individual investors and clients. I think that means it's really important for financial advisors, in particular, to make sure that they're asking the question to their investors, and if responsible investing matters to them.

Jessica Amir: Rachel White, it has been an absolute pleasure. Thank you so much for your time.

Rachel White: Thank you for having me.