Vanguard is one of the biggest companies on the planet, as well as one of the biggest investing brokerages. That means that Vanguard ethical funds (Vanguard ESG funds) are hugely important to sustainable investing- they have the client base to make a difference in how companies operate sustainably or not.
I began investing when I was 27. But I didn’t begin sustainable investing until I was 30. I use Vanguard as my brokerage, and so today I’m going to share my insight into the ESG funds that Vanguard offers. If you’re someone looking to invest sustainably, this article will help guide you through how to choose the best and most sustainable options from Vanguard.
And if you’re interested in long-term sustainable investing strategy, make sure to check out our investing course! We cover everything from choosing sustainable investments in the stock market and real estate to divesting your current investments from shady companies.
What Are Vanguard Ethical Funds (ESG Funds)?
ESG is an acronym that stands for Environmental, Social, and Governance. It’s a label assigned to investment funds and companies that identify them as being involved in these causes in some way.
ESG investing is an investment strategy that considers environmental, social, and governance factors when building an investment portfolio. There is no federally mandated definition of ESG funds, so it’s up to each index or mutual fund to determine how the companies rank.
We have an article that explains ESG fund investing in detail right here. It’s an excellent starting point for those who want to invest sustainably, but it’s not a silver bullet by any means.
When designing your sustainable investing strategy, it’s important to consider the ethics of the fund, as well as the profitability, the fees, and your own financial goals and timeline. That’s what we cover in our sustainable investing course “How to Be a Good Person and Make Money.“
Vanguard ESG funds are where I started my investing journey. Once I learned that this was an option for investors, I threw myself into learning about the funds that Vanguard offered. But there are kind of a lot, and it can be a little confusing. So let me share which ones I found worthwhile while doing my research!
Vanguard ESG Funds Offered to Investors
To clarify: these are not funds I suggest you buy, nor are they necessarily the funds I currently invest in. These are just some of the Vanguard ESG funds that I have researched.
VBPIX- This Vanguard fund is 100% fossil fuel free, making it very attractive to investors like me who hate that fossil fuels are the major cause of climate change. Not giving any more money to Exxon or Chevron, so that they can’t dump oil into the mouths of baby seals sounds great!
This fund is actively managed, which means it’s more expensive than an index fund. (Don’t know what an index fund is? Check out our investing 101 class where we break it all down!) That means over the long term the fees will add up.
If gender equality is your top ethical investing concern, you may not want this fund. The majority of companies in this fund have a gender pay gap, meaning women are underpaid. And 0% of the companies here have a commitment to equal pay.
VGT- This is another totally fossil fuel free fund, because it focuses on tech companies. But that also means companies like Microsoft, Apple, and Visa are heavily represented in this fund, and they are all well known for being…not great. Apple avoids paying US taxes, and Microsoft spends billions lobbying against privacy restrictions on tech companies.
Sustainable investing absolutely can be done, and it’s actually pretty easy. All you have to do is to decide what ethics and values you want to express through your finances.
Is it important to you to invest your money in companies that are committed to racial equality? Do you urgently want to invest in companies taking a stand on workers rights? Once you determine the cause you want to invest FOR, you can begin to build your sustainable investing strategy and build your wealth.
That’s what we help teach you in our sustainable investing class “How to Make Money and Be a Good Person” so click here if you want to learn more!
What is Vanguard and a What is an Investment Brokerage?
Vanguard is a brokerage. If your eyes are already glazing over with boredom, stay with me! A brokerage is simply a company where you keep your investment accounts. Just like you have a checking account at a bank, you have your IRA or 401k at a brokerage.
Vanguard is one of the biggest in the game. They’re a popular choice for individual investors, and they manage thousands of company retirement plans. So they’ve got a lot of power in the industry. Other major brokerages are Charles Schwab, Fidelity, and Chase.
There are other, smaller brokerages that focus on sustainable investing- let me know in the comments if you’re interested in learning about those in another post!
Most brokerages now offer a selection of ESG funds, because the demand is there! People want to invest sustainably. In 2019 Morgan Stanley found that 85% of investors were interested in sustainable investments.
And a 2022 nationwide poll from Gallup showed that 48% of American investors want to invest sustainably.