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What's ESG investing?

ESG investing, which typically assesses the factors listed below, offers a way for you to invest in funds that consider environmental, social, and governance issues. You may hear the term used interchangeably with "socially responsible investing (SRI)" and "sustainable investing."

Environmental

Conservation & protection of the natural environment

  • Air emissions and air quality.
  • Energy use and conservation.
  • Natural resources and land use.
  • Waste management and water quality.
  • Hazardous materials use.

Social

Relationships with employees, suppliers, clients & communities

  • Labor standards and employee relations.
  • Production quality and safety.
  • Local community impact.
  • Equal employment opportunities.
  • Health care, education, and housing services.

Governance

Standards for company leadership, risk controls & shareholder rights

  • Ethical business practices.
  • Board independence and diversity.
  • Voting rights.
  • Executive pay vs. employee pay.
  • Account and tax transparency.

Discover Vanguard's ESG lineup

Our ESG funds invest in stocks and bonds with differing investment styles and objectives. They're a great way to complement your portfolio with funds that reflect your values. Most of our funds are indexed and follow an exclusionary strategy that omits companies that don't meet certain ESG criteria. We currently have one active fund with an integrated strategy that includes companies making strides toward ESG practices.

Fund name

Investment type

ESG strategy

Management style

Geographic coverage

Investment type

Mutual fund

Management style

Actively managed (approx. 40–50 stocks)

Geographic coverage

U.S. and international

Investment type

ETF

Management style

Indexed (approx. 1,500 stocks)

Geographic coverage

U.S. only

Investment type

ETF

Management style

Indexed (approx. 3,000–4,000 stocks)

Geographic coverage

International only

Investment type

Mutual fund

Management style

Indexed (approx. 500 stocks)

Geographic coverage

U.S. only

Investment type

ETF

Management style

Indexed (approx. 200–300 bonds)

Geographic coverage

U.S. only

Gaining momentum

ESG investing has gone mainstream thanks to better information and an increased interest from investors seeking to align their values with their investments. It's driven by individuals who embrace the idea that their investment objectives and personal values aren't mutually exclusive.

For investors in the United States, there are more than 600 ESG funds and ETFs (exchange-traded funds) available, representing $161 billion in assets under management.*

The chart shows a decade of growth in ESG investments from about $58 billion in assets under management in 2010 to $161 billion as of July 2020. The chart shows a decade of growth in ESG investments from about $58 billion in assets under management in 2010 to $161 billion as of July 2020.

Source: Morningstar Direct. Data as of July 31, 2020

Reliable reporting & research

Investment managers and investors now have more information on how ESG factors affect companies, allowing them to make better decisions.

More than 11,000 companies worldwide report on how they incorporate ESG principles into their business strategies, resources, and operations. In addition, 125 organizations produce research on the ESG investment landscape.

Delivering long-term value

Some investors believe ESG investing means sacrificing returns. Keep in mind that as with any investment strategy that pursues objectives beyond tracking a broad market benchmark, investors should expect periods when screened ESG investments underperform or outperform the market. Over the long term, we believe our ESG products are enduring investment options for anyone interested in aligning their values with their fund selections. Since each fund is different, always pay close attention to its strategy and approach when making investment decisions.

Our dedication to responsible investing

Vanguard has been managing ESG investment products for over 20 years, starting with our FTSE Social Index Fund, which launched in 2000. It's now the largest ESG-screened index fund in the United States.*

For more than 45 years, we've taken a stand for all investors while advocating for improved corporate governance in the market. As a signatory to the United Nations-supported Principles for Responsible Investment, we encourage companies to conduct business in a socially conscious way.

Investment stewardship

We work to ensure public companies act and operate in a way that creates long-term value for fund shareholders. Our Investment Stewardship team is a leader in global governance among asset managers.

Corporate stewardship

We're committed to investing in our workplace, supporting our local communities, and developing investment products, services, and infrastructure to serve our clients' interests.

Investment management

We embrace the same investing principles across all our products: clear goals, broad diversification, low costs, and a long-term view.

*Source: Morningstar Direct. Data as of July 31, 2020

All investing is subject to risk, including the possible loss of the money you invest.

ESG funds are subject to ESG investment risk, which is the chance that the stocks or bonds screened by the index sponsor for ESG criteria generally will underperform the markets as a whole or that the particular stocks or bonds selected will, in the aggregate, trail returns of other funds screened for ESG criteria.