Next setback for the joint climate protection efforts in the financial sector: Vanguard, one of the largest asset managers in the world, has announced its withdrawal from one of the most important climate protection initiatives in the industry.

The American fund provider justified its departure from Allianz Net Zero Asset Manager (NZAM) by saying that it wanted to maintain its independence and make its views clear to investors.

Such initiatives, with many competitors committed to the same goals, would tend to create confusion.

Tim Kanning

Editor in Business.

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The NZAM is a counterpart to the banks' net zero alliance.

Among its members, especially at the major American banks JP Morgan, Morgan Standey and Bank of America, there are concerns similar to those now voiced by Vanguard (FAZ of November 18).

The members of the initiatives have set themselves the goal of reducing the greenhouse gas emissions associated with their investments to net zero by 2050.

However, some financial institutions fear that such a joint approach could result in antitrust lawsuits or that failure to achieve the goals could have legal consequences.

In addition, some large investors had publicly opposed sustainability as a primary investment goal.

"Rather buy the whole haystack"

According to the NZAM, it has 291 signatories with assets under management totaling around $66 trillion.

Vanguard accounted for $7 trillion of that.

The large German fund companies such as DWS, Deka, Union Investment and Allianz Global Investors have also joined the initiative.

Vanguard is primarily a provider of ETFs and other passive index funds and is now basically justifying its withdrawal by saying that the goals of the NZAM are difficult to reconcile with this form of investment.

Founder Jack Bogle is credited with inventing this now very popular investment vehicle, which was originally designed to simply reflect an entire market without excluding or emphasizing individual securities.

In the declaration of withdrawal from the initiative, Vanguard therefore also refers to a quote from Bogle: "Instead of looking for a needle in a haystack, it is better to buy the whole haystack." In his criticism, Vanguard basically says: It is important for healthy financial markets that Investors could assess the main risks of their investments themselves.

The broadly diversified index funds are particularly popular among Vanguard investors.

One of the largest ETFs is the Vanguard FTSE All World with more than 3500 individual stocks.

With regard to such funds, the specifications of the climate protection initiative caused more confusion.

"We have decided to withdraw from the NZAM to provide our investors with the clarity they want about the role of index funds and how we think about material risks, including climate-related risks," said Vanguard.

They also want to make it clear "that Vanguard speaks independently about issues that are important to our investors."