Vanguard rejigs Ethically Conscious options

Vanguard is updating its Ethically Conscious range of funds on the back of the FTSE Russell adding extra thresholds that will screen out more companies involved in fossil-fuel related activities.

From March 24, the FTSE Russell's Global Choice Index Series will apply revenue involvement thresholds between 0% and 5% related to oil, gas, and thermal coal activities.

The index classifies oil, gas, and coal as fossil fuels in its non-renewable energy category of company products.

Previously, thermal coal, oil, and gas business involvement was identified using industry classifications and reserve ownership.

"Prior to the change, oil and gas business involvement was identified using industry classifications which meant that more diversified businesses involved in fossil fuels may not have been excluded," Vanguard told investors.

"These changes seek to support investor-decision making and maintain the stated long-term investment objectives of the Vanguard Ethically Conscious Australian Shares Fund and Vanguard Ethically Conscious International Shares Index Funds."

Additionally, an update to the Bloomberg MSCI Global Aggregate SRI Exclusion Float Adjusted Index methodology will lead to changes in the Vanguard Ethically Conscious Global Aggregate Bond Index (Hedged) ETF.

From April 1, one of the changes in the index will see the "fossil fuel - any tie" screen removed.

The revenue threshold for oil and gas-related activities will also increase from 0% to 5%.

Corporate issuers will be screened against new 5% revenue thresholds for oil sands extraction and Arctic oil and gas production-related activities. Previously, there were no exclusionary screens for these activities.

Vanguard said changes to the index methodology "seek to improve the clarity and specificity around exclusionary screen classifications and thresholds and maintain the investment characteristics of the index disaggregating the "fossil fuel - any tie" screen into distinct exclusion criteria provides additional clarity for investors regarding what is being screened as part of the index methodology."

Vanguard added that it is "dedicated to researching and developing low cost, high-quality exclusionary screened products, and continues to evaluate options in this category to provide investors with solutions that support their financial goals while seeking to limit exposure to certain products and services, providing investor choice."