Investors Say Vanguard Violates Fiduciary Duty by Not Adequately Addressing Climate Risk

PHILADELPHIA — In response to Vanguard’s failure to take steps to mitigate financial risk from climate change, more than 1,400 individual customers — and counting — have sent letters to Vanguard’s general counsel alleging that Vanguard is breaching its fiduciary duties. The full text of the letter is available here.

The letter specifically asserts that Vanguard is violating its duty of care to investors. The letter criticizes Vanguard for falling behind its industry peers on mitigating climate risk, as well as for “lack of attention to prudent proxy voting.”  

The letter also asserts that Vanguard is violating its duty of loyalty. “In recent months, Vanguard has opaquely placed the firm’s own financial interests ahead of those of its investors’,” the letter states, while citing Vanguard’s withdrawal from the Net Zero Asset Managers Initiative as well as raising the potential for litigation similar to a recently settled lawsuit in Australia. 

The letter concludes with a demand that Vanguard release “a comprehensive plan outlining concrete steps the company will take to address climate risk.”

The letter was first drafted by investor Paul Rissman, who is a current customer and trustee of Vanguard accounts that his mother passed down to his children. Prior to his retirement in 2008, he was Executive Vice President of AllianceBernstein L.P. and Chief Investment Officer of Alliance Growth Equities. He is currently a Director of the Sierra Club Foundation.

“Before my Mom passed, she asked me to be trustee of accounts that she set up for her grandkids,” said Paul Rissman. “That means I’m a fiduciary, just like Vanguard is a fiduciary to me. Climate change will ruin this legacy. Only Vanguard can help me preserve it, and they refuse to act.” 

Beyond Rissman, additional signatures for the letter were collected online, but each letter has been physically printed and mailed so that Vanguard’s general counsel will receive a physical letter from each Vanguard client who has signed the letter. The effort is ongoing and additional letters will continue to be sent. 

LEGAL EXPERTS VALIDATE CONCERNS

Experts in fiduciary duty have validated the concerns raised by the letter. 

Professor Susan Gary is the Professor Emerita of Law at the University of Oregon and has written extensively on the application of the fiduciary duty rules to investment decision making by fiduciaries. She states:

"Asset managers like Vanguard have legal responsibilities to their customers. They act as fiduciaries, so they are governed by the duties of care, loyalty, and impartiality. Vanguard has said climate change is a material risk to their clients’ investments, so it would follow that Vanguard should do what it can to mitigate that material risk. If Vanguard fails to address material risk, it may be violating its duty of care to its customers. If Vanguard is putting its own interests above its customers’ interests, it could be violating the duty of loyalty. And if Vanguard is preferencing one set of customers over another, it could be violating its duty of impartiality. Vanguard should be concerned that if it is in breach of these fiduciary responsibilities, its customers could have grounds for a class action suit," said Susan Gary, Professor Emerita of Law at the University of Oregon. 

AVAILABLE FOR INTERVIEWS

Rissman and additional signers of the letter, as well as fiduciary experts, are available for interview with journalists upon request.

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