Vanguard announced some big changes to its primary impacting investing mutual fund VFTAX (admiral shares) VFTSX (investor shares).
The index provider for the FTSE4Good US Select Index (the “Index”), which is the index tracked by the Fund, announced that it will revise the methodology for the Index. FTSE plans to update the environmental, social, and governance (“ESG”) screens utilized to determine the companies that comprise the Index and will also change the Index rebalance schedule from annually to quarterly. The Index methodology change will take effect with the first quarterly Index rebalance in March 2020.
Changes to the index methodology
The methodology change will result in the following primary updates to the ESG screens:
(i) FTSE will add a fossil fuels screen (described in more detail below);
(ii) FTSE will add a screen for companies that do not meet certain anti-corruption criteria in accordance with the United Nations Global Compact Principles;
(iii) FTSE will modify the Vice Screens to primarily exclude producers, rather than, for example, producers, distributors, or retailers, of various products; and
(iv) FTSE will evaluate companies under the Company Conduct Screens in accordance with the United Nations Global Compact Principles.
VFTAX is one of the funds I hold and I think these changes are for the positive. The quarterly rebalancing is effective in an arena that is constantly evolving. In terms of impacting investing ESG mutual funds VFTAX is difficult to beat.