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."
Discover Vanguard's ESG lineup
Our ESG funds, which have differing investment styles and objectives, invest in stocks and bonds. 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 inclusionary strategy that includes companies making strides toward ESG practices.
| Fund | Investment type | ESG strategy | Management style | Geographic coverage | |
| VEIGX Global ESG Select Stock Fund |
Mutual fund | Inclusionary What's included |
Actively managed (approx. 40-50 stocks) |
U.S. and international | |
| ESGV ESG U.S. Stock ETF |
ETF | Exclusionary What's excluded |
Indexed (approx. 1,500 stocks) |
U.S. only | |
| VSGX ESG International Stock ETF |
ETF | Exclusionary What's excluded |
Indexed (approx. 3,000-4,000 stocks) |
International only | |
| VFTAX FTSE Social Index Fund |
Mutual fund | Exclusionary What's excluded |
Indexed (approx. 500 stocks) |
U.S. only | |
| VCEB ESG U.S. Corporate Bond ETF |
ETF |
Exclusionary What's excluded |
Indexed (approx. 200-300 bonds) |
U.S. only |
ESG strategies for socially conscious investors
Not all ESG strategies are the same. Most ESG funds apply one of the following:
ESG integration
Regularly including ESG factors alongside the traditional investment analysis performed by active fund managers. This strategy doesn't require the fund to rule out any company, industry, or country simply because it's involved in a business activity that may be objectionable to some. Example: The portfolio manager chooses to include the stock of a well-performing energy company that is thoughtfully navigating the transition from fossil fuels to sustainable resources.
Portfolio screening
Exclusionary. Excluding or underweighting certain sectors, countries, and securities. Example: Ruling out companies that manufacture or sell tobacco or guns.
Inclusionary. Investing in sectors or companies with higher ESG ratings than their industry peers or other investment opportunities. Example: A mining company that's inherently risky environmentally but ranks high on managing the environmental impacts of its products and services.
Advocacy
Using resources to positively influence corporate behavior on ESG-related issues. Examples: Fundraising for charitable organizations or donating to the organizations to impact a specific cause, public activism, encouraging action at a local level, and directly communicating with a company or policymaker.
Impact investing
Targeting investments, often made in private markets, to generate positive societal or environmental impact and a financial return. Example: Investing in companies developing renewable energy sources.
What's excluded
Excludes companies that:
- Produce alcohol, tobacco, gambling, and adult entertainment.
- Produce civilian, controversial, and conventional weapons.
- Produce nuclear power.
- Do not meet certain diversity criteria.
- Have violations of labor rights, human rights, anti-corruption, and environmental standards defined by UN Global Compact Principles.*
- Own proved or probable reserves in fossil fuels such as coal, oil, or gas.**
*For more information, go to unglobalcompact.org/what-is-gc/mission/principles
**This also excludes any company that FTSE determines has a primary business activity in: (a) the exploration and drilling for, as well as producing, refining, and supplying, oil and gas products, (b) the supply of equipment and services to oil fields and offshore platforms, (c) the operations of pipelines carrying oil, gas, or other forms of fuel, (d) integrated oil and gas companies that provide a combination of services listed in (a)-(c) above, including the refining and marketing of oil and gas products, or (e) the exploration for or mining of coal.
What's excluded
Excludes companies that*:
- Derive any revenue from involvement in controversial weapons, civilian firearms, nuclear power, or fossil fuels.
- Derive any revenue from the production of tobacco, cannabis, or conventional military weapons, or greater than 5% revenue from supplying or retailing these products.
- Derive greater than 5% revenue from the production of alcohol, gambling, or adult entertainment, or greater than 10% revenue from supplying or retailing these products.
- Do not meet certain board and workforce diversity criteria.
- Have violations of labor rights, human rights, anticorruption, or environmental standards as defined by the U.N. Global Compact principles.**
*See the Security Selection section in the ETF’s prospectus for additional information on index construction.
**For more information, see United Nations Global Compact, 2020. The Ten Principles of the UN Global Compact. Accessed December 2, 2020, at unglobalcompact.org/what-is-gc/mission/principles.
What's excluded
Excludes companies that*:
- Derive any revenue from involvement in controversial weapons, civilian firearms, nuclear power, or fossil fuels.
- Derive any revenue from the production of tobacco or conventional military weapons, or greater than 5% revenue from supplying or retailing these products.
- Derive greater than 5% revenue from the production of alcohol, gambling, or adult entertainment, or greater than 10% revenue from supplying or retailing these products.
- Do not meet certain board and workforce diversity criteria.
- Have violations of labor rights, human rights, anticorruption, or environmental standards as defined by the U.N. Global Compact principles.**
*See the Security Selection section in the ETF’s prospectus for additional information on index construction.
**For more information, see United Nations Global Compact, 2020. The Ten Principles of the UN Global Compact. Accessed December 2, 2020, at unglobalcompact.org/what-is-gc/mission/principles.
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
VEIGX
Global ESG Select Stock Fund
Investment type
Mutual fund
ESG strategy
Integrated
What's included
Management style
Actively managed (approx. 40-50 stocks)
Geographic coverage
U.S. and international
Fund
ESGV
ESG U.S. Stock ETF
Investment type
ETF
ESG strategy
Exclusionary
What's excluded
Management style
Indexed (approx. 1,500 stocks)
Geographic coverage
U.S. only
Fund
VSGX
ESG International Stock ETF
Investment type
ETF
ESG strategy
Exclusionary
What's excluded
Management style
Indexed (approx. 3,000-4,000 stocks)
Geographic coverage
International only
Fund
VFTAX
FTSE Social Index Fund
Investment type
Mutual fund
ESG strategy
Exclusionary
What's excluded
Management style
Indexed (approx. 500 stocks)
Geographic coverage
U.S. only
Fund
VCEB
ESG U.S. Corporate Bond ETF
Investment type
ETF
ESG strategy
Exclusionary
What's excluded
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 make an impact through their investment decisions. 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.*
Source: Morningstar Direct. Data as of September 20, 2021.
Gaining momentum
ESG investing has gone mainstream thanks to better information and an increased interest from investors seeking to make an impact through their investment decisions. 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.*
Source: Morningstar Direct. Data as of July 31, 2020
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.
*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 provider for ESG criteria generally will underperform the market as a whole or, in the aggregate, will trail returns of other funds screened for ESG criteria. The index provider’s assessment of a company, based on the company’s level of involvement in a particular industry or the index provider’s own ESG criteria, may differ from that of other funds or of the advisor’s or an investor’s assessment of such company. As a result, the companies deemed eligible by the index provider may not reflect the beliefs and values of any particular investor and may not exhibit positive or favorable ESG characteristics. The evaluation of companies for ESG screening or integration is dependent on the timely and accurate reporting of ESG data by the companies. Successful application of the screens will depend on the index provider’s proper identification and analysis of ESG data.
For more information about Vanguard funds or ETFs, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.