Vanguard Institutional Index Fund is likely to concern sustainability-focused investors given certain substandard ESG attributes.
The ESG risk of Vanguard Institutional Index Fund's holdings is comparable to its peers in the US Equity Large Cap Blend category, thus earning an average Morningstar Sustainability Rating of 3 globes. Funds in the same category rated 4 or 5 globes tend to hold securities less exposed to ESG risk. ESG risk measures the degree to which material environmental, social, and governance issues, such as climate change and inequalities, could affect valuations. ESG risk differs from impact, which is about driving positive environmental and social outcomes for society’s benefit.
Vanguard Institutional Index Fund has a Carbon Risk Score of 7.52, indicating portfolio companies face low carbon-related risks in the transition to a low-carbon economy.
One potential issue for a sustainability-focused investor is that Vanguard Institutional Index Fund doesn’t have an ESG-focused mandate. A fund with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. The fund's current involvement in fossil fuels reaches 9.21%, surpassing 7.77% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas. The fund exhibits relatively high exposure (9.54%) to companies with high or severe controversies. Companies with high or severe controversies may be involved in incidents such as corruption, employee abuses, environmental incidents, and corporate scandals that pose serious business risks to the company.