Vanguard Just Announced Two New ESG ETFs

So I got an interesting email from Vanguard this morning, and maybe some of you did too: Vanguard has just developed two new ETFs that “screen out stocks of companies that don’t meet certain environmental, social, and governance (ESG) criteria.”

When you visit Vanguard’s website, you learn exactly what went into (or in this case, what didn’t go into) the development of the Vanguard ESG U.S. Stock ETF (ESGV) and the Vanguard ESG International Stock ETF (VSGX):

In this case, both ETFs exclude the stocks of companies that don’t meet certain criteria in connection with the production or manufacture of:

  • Adult entertainment.
  • Alcohol and tobacco products.
  • Conventional and controversial weapons (including civilian firearms).
  • Fossil fuels such as natural gas, oil, and coal.
  • Gambling activities.
  • Nuclear power.

The ETFs also steer clear of companies that don’t meet certain diversity criteria, as well as the labor, human rights, anti-corruption, and environmental standards defined by the Ten Principles of the U.N. Global Compact.

Vanguard notes that these ETFs might not perform exactly like a total stock market ETF, which seems like they’re hinting that they might have a lower rate of return.

As of this writing, the ESG U.S. Stock ETF is trading at $50.40/share, compared to Vanguard’s Total Stock Market ETF (VTI) which is trading at $151.145/share; the ESG International Stock ETF is trading at $51.11/share, compared to Vanguard’s Total International Stock Index Fund ETF (VXUS) which is trading at $54.49/share. The value of both ESG ETFs is going up, though, and probably will continue to rise as more people check their email and decide to invest.

Which means — well, if I’m going to do this, I have to do it RIGHT NOW, right? And I have to re-invest all of my brokerage money, because it would be hypocritical to say “I want to invest in ESG funds because I support environmental protection and human rights” while still keeping money in non-ESG funds.

But the other part of me says “I’m not investing in something that’s only existed for, like, a day,” even though that would seem to be the ideal time to do it. Early adopters often prosper!

Another part of me wants to know more about this ESG criteria, because I’m not exactly anti nuclear power and I’m definitely not anti adult entertainment, so is it like, only the companies that do exploitative stuff with adult entertainment or gambling or whatever? Because I don’t care if you gamble (while I also recognize that the gambling industry is designed to extract as much money from people as possible and disproportionately affects the poor — but casinos have also helped bring income into Native American communities, so IT’S COMPLICATED).

Luckily, Vanguard does provide a guide to how its ESG stocks are screened; unluckily, it includes all companies that produce adult entertainment, all companies that produce alcoholetc. (Does this mean that Amazon is off the list, because I have Chuck Tingle books on my Kindle?)

I was about to say that this made my decision a little easier, but then I realized that I’d effectively be saying “because I think a prohibition on companies that produce alcohol is ridiculous, I’ll continue to invest in ETFs that might include companies that don’t meet environmental, human rights, or diversity standards.”

AUGHERBLARGH! This is too complicated! I wish I’d just deleted that email without reading it.

What advice do you have to offer, Billfold readers?

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