Vanguard to Expand ESG Lineup with Positive Impact Stock Fund
Vanguard recently filed an initial registration statement with the U.S. Securities and Exchange Commission to introduce Vanguard Baillie Gifford Global Positive Impact Stock Fund, which is designed to meet the needs of investors seeking actively managed global equity returns along with measurable impact on environmental and social challenges. The fund is expected to launch in the second quarter of 2022 and subsequently seek to adopt the existing Baillie Gifford Positive Change Equities Fund, contingent upon shareholder approval. Vanguard expects to make the combined fund available for public investment in the third quarter.
“We’ll continue to thoughtfully expand our ESG lineup, introducing funds and ETFs with enduring investment merit that reflect clients’ needs and preferences,” said Vanguard Chairman and CEO Tim Buckley. “The new Global Positive Impact Stock Fund will tap Baillie Gifford’s significant expertise in fundamental equity research and impact analysis, helping our clients to achieve both their impact and investment goals.”
Impact investing is a dual-mandate investment strategy in which portfolio managers target companies that will generate returns as well as positive social and/or environmental impact. Vanguard believes an active approach to impact investing enables skilled managers to better navigate the complexities of identifying companies driving positive change and build a portfolio with the potential to deliver on both excess return and impact objectives.
Vanguard’s new fund will seek to adopt the existing Baillie Gifford Positive Change Equities Fund. Introduced in 2017, Baillie Gifford’s fund employs a consistent framework to identify high-quality growth companies driving solutions to global challenges. Its portfolio managers expect these companies to achieve strong long-term returns. The fund’s global mandate provides clients with the broadest exposure to companies that meet both excess return and impact objectives.
In the second quarter of 2022, Baillie Gifford will conduct a proxy vote for approval from the Positive Change Equities Fund’s existing shareholders to undergo a tax-free reorganization into the new Vanguard fund. Vanguard and Baillie Gifford are confident that this approach serves both existing and prospective investors, as the new fund is expected to have lower shareholder costs. If the reorganization is approved, current shareholders of the Positive Change Equities Fund are expected to realize an expense ratio reduction of approximately 0.06%. With an estimated expense ratio of 0.59%, the new Vanguard fund will be favorably priced compared to similar funds in its category, which have an average expense ratio of 1.49%.1
Vanguard Baillie Gifford Global Positive Impact Stock Fund will maintain the investment objectives and portfolio management team of the existing Baillie Gifford fund, ensuring consistency upon reorganization. Furthermore, Baillie Gifford will continue to produce an annual impact report using robust, bottom-up research that complements its investment analysis.
“We hope that this fund adoption will broaden access to impact investing at a very competitive cost,” said Andrew Telfer, Baillie Gifford Joint Senior Partner. “As a result, it should help to channel more capital towards companies driving positive change.”
A growing ESG lineup
Vanguard has offered ESG funds to U.S. investors for more than two decades and continues to broaden its lineup with solutions that enable investors to better align investment objectives with personal values and ESG considerations. Vanguard has grown its ESG lineup to reflect the evolving investment goals of investors. Vanguard’s exclusionary-screened equity and fixed income ETFs serve investors who want to reflect certain values or prefer to avoid certain sectors or ESG risks in their portfolio. The firm’s existing active ESG mutual fund is designed for clients who want to invest in companies with leading ESG practices and strong business fundamentals. The new Global Positive Impact Stock Fund will broaden Vanguard’s overall ESG product suite and expand the firm’s active ESG offerings.
1 Sources: Morningstar, Vanguard.
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