How to invest

4 kinds of ESG funds: What you need to know

ESG is still a relatively new phenomenon. We’ve outlined the 4 major categories of ESG products* to give you a feel for how they’re different and how they can work for you.
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May 09, 2022
How to invest
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ESGs

It’s natural to want your portfolio to reflect who you are, what you believe in, and where you think the world is heading. That’s what ESG (environmental, social, and governance) investing is all about. (You may have also heard it called “sustainable investing.”) Many ESG funds have popped up to give investors the chance to put their money where their values are—but ESG is still a relatively new phenomenon, and the landscape can be a little confusing. We’ve outlined the 4 major categories of ESG products* to give you a feel for how they’re different and how they can work for you.

As ESG investing comes into its own, we’re committed to helping you make decisions that are right for your portfolio—and for who you are as a person. We’re carefully researching new ESG offerings to see if they have the potential to provide the value our clients deserve. That’s our investor-first philosophy in action.

And as for the funds we offer today? We stand behind them 100%.

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*This information is intended for educational purposes for investors. These are examples of general strategy and criteria that can be used for ESG investing. The advisors of Vanguard ESG funds may not apply this same strategy or criteria. Vanguard does not currently employ all of these methods.

**Excludes companies that derive any revenue from the production or manufacturing of tobacco or conventional weapons, or greater than 5% revenue from supplying or retailing these products. Excludes companies that derive any revenue from controversial weapons, civilian firearms, or fossil fuels.

***The advisor may not be successful in assessing and identifying companies that have or will have a positive impact, or support a given position. In some circumstances, companies could ultimately have a negative impact, or no impact.

For more information about Vanguard funds or Vanguard 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.

You must buy and sell Vanguard ETF Shares through Vanguard Brokerage Services (we offer them commission-free) or through another broker (which may charge commissions). See the Vanguard Brokerage Services commission and fee schedules for full details. Vanguard ETF Shares are not redeemable directly with the issuing fund other than in very large aggregations worth millions of dollars. ETFs are subject to market volatility. When buying or selling an ETF, you will pay or receive the current market price, which may be more or less than net asset value.

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.

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.

Investments in bonds are subject to interest rate, credit, and inflation risk. Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.