Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

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Betelgeuse79
Posts: 73
Joined: Sat Mar 07, 2020 2:25 am

Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by Betelgeuse79 »

Good morning,

I've been investing for about two years with a 4 funds portfolio, with a 65%/35% equity/fixed income asset allocation. I'm 42 and this seems to be the allocation I'm comfortable with and which doesn't make me lose sleep.

Within my 65% equity allocation I have:

70% in iShares MSCI World SRI UCITS ETF EUR (Acc) (IE00BYX2JD69);

15% in iShares MSCI EM IMI ESG Screened UCITS ETF USD A (IE00BFNM3P36); and

15% in iShares MSCI World Small Cap UCITS ETF USD Acc (IE00BF4RFH31).

I rebalance my equity funds once a year to keep this 70/15/15 allocation, or whenever there is a variation of more than 5%.


Now, this is not a difficult allocation to manage or rebalance, but I am attracted to the idea of simplifying my strategy even further. To this end, I'm considering changing my three equity funds for

Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating (IE00BNG8L278).

The internal allocation is different (for instance EMs are about 8.5% in the Vanguard fund while I'm currently 15% in EMs), but I don't terribly mind. In addition to simplicity, this fund also offers more diversification: My core fund (iShares MSCI World SRI UCITS ETF EUR (Acc)) is very top-heavy, with the top ten holdings counting for 27.79% of the total assets of the fund. In the Vanguard fund, on the other hand, the top ten holdings amount to 16.65% of the total assets. It seems to me that this affords a higher degree of diversification.

I'm not sure there is a better choice here, but I would be interested in hearing your thoughts on this. Would you stay with the three funds or sell them all to buy Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating, thereby achieving greater simplicity and diversification?

What other factors would you consider in assessing the pros and cons of this shift? (The TER is slightly higher in the Vanguard fund but they do the rebalancing, so the difference is neglectable I think).

Best regards to all!
Laurizas
Posts: 519
Joined: Mon Dec 31, 2018 3:44 am
Location: Lithuania

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by Laurizas »

Betelgeuse79 wrote: Wed Oct 20, 2021 3:18 am What other factors would you consider in assessing the pros and cons of this shift? (The TER is slightly higher in the Vanguard fund but they do the rebalancing, so the difference is neglectable I think).
1) I would consider taxes if you sell your funds.
2) ESG is a deviation from the market, if you want simplicity why not Vanguard FTSE All-World or iShares MSCI ACWI?
Topic Author
Betelgeuse79
Posts: 73
Joined: Sat Mar 07, 2020 2:25 am

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by Betelgeuse79 »

Thanks Laurizas - I am a tax resident of the Netherlands where there are no capital gains taxes, so selling my funds wouldn't trigger a taxable event.

As for the ESG, I am not comfortable owning stakes in industries which are heavy in fossil fuels or controversial weapons. This is a personal choice and I'm aware many disagree that it is even an effective choice at all, but I prefer to stick to it.

In any event, my understanding is that neither Vanguard FTSE All-World nor iShares MSCI ACW hold small caps, which I'm interested in owning. That's why I like Vanguard ESG Global All Cap UCITS ETF (and the ESG criteria this fund applies are much less strict than my current iShares SRI AW fund).
Valuethinker
Posts: 49035
Joined: Fri May 11, 2007 11:07 am

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by Valuethinker »

Betelgeuse79 wrote: Wed Oct 20, 2021 4:48 am Thanks Laurizas - I am a tax resident of the Netherlands where there are no capital gains taxes, so selling my funds wouldn't trigger a taxable event.

As for the ESG, I am not comfortable owning stakes in industries which are heavy in fossil fuels or controversial weapons. This is a personal choice and I'm aware many disagree that it is even an effective choice at all, but I prefer to stick to it.

In any event, my understanding is that neither Vanguard FTSE All-World nor iShares MSCI ACW hold small caps, which I'm interested in owning. That's why I like Vanguard ESG Global All Cap UCITS ETF (and the ESG criteria this fund applies are much less strict than my current iShares SRI AW fund).
General comment re SRI/ ESG

The former head of Blackrock sustainable investing has come out against SRI investing of the passive sort. For the same reason I have - it's "do good wash" vs actually doing good (which is the realm of policy, politics & also corporate governance). I give money to activist organisations like Greenpeace.

It has been a good investment strategy in recent years to avoid high carbon investments. Read Dieter Helm "Burnout: the carbon end game" for some very intelligent and readable thoughts about how companies and countries may respond to the new world. Helm, a respected energy economist at Oxford University, is careful not to set timelines or to quantify. But if I consider where I thought we were on Electric Vehicles 5-7 years ago say, and where we are now ... change is incremental and almost not noticeable, and suddenly I see EVs on London streets every day.

Emerging Market companies have serious issues with governance & environmental strategies. Let me tell you about Palm Oil some time... (but all the world's major consumer food makers are culpable).

Your Portfolio

The main things to consider are:

- expense ratios which I don't think you have quoted
- coverage of stocks

Simpler is always better.
Laurizas
Posts: 519
Joined: Mon Dec 31, 2018 3:44 am
Location: Lithuania

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by Laurizas »

Betelgeuse79 wrote: Wed Oct 20, 2021 4:48 am As for the ESG, I am not comfortable owning stakes in industries which are heavy in fossil fuels or controversial weapons. This is a personal choice and I'm aware many disagree that it is even an effective choice at all, but I prefer to stick to it.
But think of this from other side - by owning shares of ETF you enable ETF provider to vote in shareholder meetings for policies which enable these companies to become more ESG:)
Betelgeuse79 wrote: Wed Oct 20, 2021 4:48 am In any event, my understanding is that neither Vanguard FTSE All-World nor iShares MSCI ACW hold small caps, which I'm interested in owning.
There are too little of small caps in Vanguard ESG Global All Cap UCITS to move a needle.
Valuethinker
Posts: 49035
Joined: Fri May 11, 2007 11:07 am

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by Valuethinker »

Laurizas wrote: Wed Oct 20, 2021 6:26 am
Betelgeuse79 wrote: Wed Oct 20, 2021 4:48 am As for the ESG, I am not comfortable owning stakes in industries which are heavy in fossil fuels or controversial weapons. This is a personal choice and I'm aware many disagree that it is even an effective choice at all, but I prefer to stick to it.
But think of this from other side - by owning shares of ETF you enable ETF provider to vote in shareholder meetings for policies which enable these companies to become more ESG:)
But do they do that? More than 99% of resolutions are passed by shareholders.

If the company knows you need to own their shares anyways, why would they pay any attention?
Betelgeuse79 wrote: Wed Oct 20, 2021 4:48 am In any event, my understanding is that neither Vanguard FTSE All-World nor iShares MSCI ACW hold small caps, which I'm interested in owning.
There are too little of small caps in Vanguard ESG Global All Cap UCITS to move a needle.
[/quote]

What is a reasonable estimate of the percentage of small caps in the total world market? I don't know, off hand.
oogZoo
Posts: 102
Joined: Mon Sep 02, 2019 12:05 pm

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by oogZoo »

Valuethinker wrote: Wed Oct 20, 2021 7:45 am What is a reasonable estimate of the percentage of small caps in the total world market? I don't know, off hand.
I was curious about this so I calculated the percentages of MSCI and FTSE classifications of the categories.

Market caps of MSCI ACWI indexes:

MSCI ACWI Index: 65.81166112E12 USD
MSCI ACWI IMI Index: 75.33214926E12 USD, so Small Cap is 9.52048814E12 USD
MSCI ACWI All Cap Index: 76.08051984E12 USD, so Micro Cap is 0.74837058000E12 USD

So out of "MSCI ACWI All Cap":

Large+Mid Cap is 86.5%
Small Cap is 12.5%
Micro Cap is 1.0%

...or out of "MSCI ACWI IMI" (excluding Micro Cap):

Large+Mid Cap is 87.4%
Small Cap is 12.6%

Sources: https://www.msci.com/resources/factshee ... i-acwi.pdf, https://www.msci.com/resources/factshee ... wi-imi.pdf, https://www.msci.com/resources/factshee ... ll-cap.pdf

Market caps of FTSE indexes:

FTSE All-World Index: 66.581855E12 USD
FTSE Global Small Cap Index: 8.014826E12 USD
FTSE Global Micro Cap Index: 1.778980E12 USD
FTSE Global Total Cap Index: 76.375660E12 USD

So out of "FTSE Global Total Cap":

Large+Mid Cap is 87.2%
Small Cap is 10.5%
Micro Cap is 2.3%

... or excluding "Micro Cap":

Large+Mid Cap is 89.3%
Small Cap is 10.7%

Sources: https://research.ftserussell.com/Analyt ... nual=false, https://research.ftserussell.com/Analyt ... nual=false, https://research.ftserussell.com/Analyt ... nual=false, https://research.ftserussell.com/Analyt ... nual=false
Valuethinker
Posts: 49035
Joined: Fri May 11, 2007 11:07 am

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by Valuethinker »

oogZoo wrote: Wed Oct 20, 2021 10:27 am
Valuethinker wrote: Wed Oct 20, 2021 7:45 am What is a reasonable estimate of the percentage of small caps in the total world market? I don't know, off hand.
I was curious about this so I calculated the percentages of MSCI and FTSE classifications of the categories.

Market caps of MSCI ACWI indexes:

MSCI ACWI Index: 65.81166112E12 USD
MSCI ACWI IMI Index: 75.33214926E12 USD, so Small Cap is 9.52048814E12 USD
MSCI ACWI All Cap Index: 76.08051984E12 USD, so Micro Cap is 0.74837058000E12 USD

So out of "MSCI ACWI All Cap":

Large+Mid Cap is 86.5%
Small Cap is 12.5%
Micro Cap is 1.0%

...or out of "MSCI ACWI IMI" (excluding Micro Cap):

Large+Mid Cap is 87.4%
Small Cap is 12.6%

Sources: https://www.msci.com/resources/factshee ... i-acwi.pdf, https://www.msci.com/resources/factshee ... wi-imi.pdf, https://www.msci.com/resources/factshee ... ll-cap.pdf

Market caps of FTSE indexes:

FTSE All-World Index: 66.581855E12 USD
FTSE Global Small Cap Index: 8.014826E12 USD
FTSE Global Micro Cap Index: 1.778980E12 USD
FTSE Global Total Cap Index: 76.375660E12 USD

So out of "FTSE Global Total Cap":

Large+Mid Cap is 87.2%
Small Cap is 10.5%
Micro Cap is 2.3%

... or excluding "Micro Cap":

Large+Mid Cap is 89.3%
Small Cap is 10.7%

Sources: https://research.ftserussell.com/Analyt ... nual=false, https://research.ftserussell.com/Analyt ... nual=false, https://research.ftserussell.com/Analyt ... nual=false, https://research.ftserussell.com/Analyt ... nual=false
Thank You very much that is very helpful information.
Laurizas
Posts: 519
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Location: Lithuania

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by Laurizas »

Valuethinker wrote: Wed Oct 20, 2021 7:45 am What is a reasonable estimate of the percentage of small caps in the total world market? I don't know, off hand.
Small 5.19
Micro 0.49
https://www.morningstar.co.uk/uk/etf/sn ... entType=FE
Laurizas
Posts: 519
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Location: Lithuania

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by Laurizas »

Valuethinker wrote: Wed Oct 20, 2021 7:45 am
Laurizas wrote: Wed Oct 20, 2021 6:26 am
Betelgeuse79 wrote: Wed Oct 20, 2021 4:48 am As for the ESG, I am not comfortable owning stakes in industries which are heavy in fossil fuels or controversial weapons. This is a personal choice and I'm aware many disagree that it is even an effective choice at all, but I prefer to stick to it.
But think of this from other side - by owning shares of ETF you enable ETF provider to vote in shareholder meetings for policies which enable these companies to become more ESG:)
But do they do that? More than 99% of resolutions are passed by shareholders.
Not sure, but this documents "Vanguard funds Proxy voting policy for U.S. portfolio companies" provides that:
wrote: Environmental/social disclosure. The Vanguard funds continue to vote shareholder
proposals on a case-by-case basis, including environmental and social matters. A fund is likely
to support proposals that are disclosure-oriented and support reasonable enhancements to,
or address a shortcoming in, company practices relevant to oversight of related risks and
strategies. The following are additional considerations for common proposal types, evaluated
on a case-by-case basis relative to current company practices:
Climate-related. A fund is likely to support proposals that request disclosure on how climate
change risks are incorporated into strategy and capital allocation decisions, ask for an
assessment of climate impact (including scenario analysis),
and/or request feasibility analysis (see page 11).
Workforce diversity. A fund is likely to support proposals that request disclosure
on workforce demographics, including gender and racial/ethnic categories. A fund also
will consider other widely accepted industry standards, and, where appropriate, applicable
laws and regulations (see page 12).
Corporate political activity. The Vanguard funds will vote all proposals on a case-by-case
basis, prioritizing the long-term financial materiality to a fund’s investors. A fund may vote
in support of proposals where investors would benefit from enhanced oversight or greater
disclosure of political spending and/or lobbying activities, policies, or practices
https://about.vanguard.com/investment-s ... ummary.pdf
https://global.vanguard.com/portal/site ... guidelines
Valuethinker wrote: Wed Oct 20, 2021 7:45 am If the company knows you need to own their shares anyways, why would they pay any attention?
Because shareholders can change the members of management board. If one does not pay attention, he/she will be replaced by others who do.
Valuethinker
Posts: 49035
Joined: Fri May 11, 2007 11:07 am

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by Valuethinker »

Laurizas wrote: Fri Oct 22, 2021 7:37 am
Valuethinker wrote: Wed Oct 20, 2021 7:45 am
Laurizas wrote: Wed Oct 20, 2021 6:26 am
Betelgeuse79 wrote: Wed Oct 20, 2021 4:48 am As for the ESG, I am not comfortable owning stakes in industries which are heavy in fossil fuels or controversial weapons. This is a personal choice and I'm aware many disagree that it is even an effective choice at all, but I prefer to stick to it.
But think of this from other side - by owning shares of ETF you enable ETF provider to vote in shareholder meetings for policies which enable these companies to become more ESG:)
But do they do that? More than 99% of resolutions are passed by shareholders.
Not sure, but this documents "Vanguard funds Proxy voting policy for U.S. portfolio companies" provides that:
wrote: Environmental/social disclosure. The Vanguard funds continue to vote shareholder
proposals on a case-by-case basis, including environmental and social matters. A fund is likely
to support proposals that are disclosure-oriented and support reasonable enhancements to,
or address a shortcoming in, company practices relevant to oversight of related risks and
strategies. The following are additional considerations for common proposal types, evaluated
on a case-by-case basis relative to current company practices:
Climate-related. A fund is likely to support proposals that request disclosure on how climate
change risks are incorporated into strategy and capital allocation decisions, ask for an
assessment of climate impact (including scenario analysis),
and/or request feasibility analysis (see page 11).
Workforce diversity. A fund is likely to support proposals that request disclosure
on workforce demographics, including gender and racial/ethnic categories. A fund also
will consider other widely accepted industry standards, and, where appropriate, applicable
laws and regulations (see page 12).
Corporate political activity. The Vanguard funds will vote all proposals on a case-by-case
basis, prioritizing the long-term financial materiality to a fund’s investors. A fund may vote
in support of proposals where investors would benefit from enhanced oversight or greater
disclosure of political spending and/or lobbying activities, policies, or practices
https://about.vanguard.com/investment-s ... ummary.pdf
https://global.vanguard.com/portal/site ... guidelines
Valuethinker wrote: Wed Oct 20, 2021 7:45 am If the company knows you need to own their shares anyways, why would they pay any attention?
Because shareholders can change the members of management board. If one does not pay attention, he/she will be replaced by others who do.
99% of resolutions introduced by the company pass. Very few 3rd party resolutions pass. Institutional investors go by ISS and Glass-Lewis voting advisories, mostly.

Directors are very seldom evicted. Usually only when you get an activist fund like Elliot Associates, concerned about share underperformance. Edward Bramley at Foreign & Colonial and then Barclays.

An *activist* SRI fund could make a difference. But we are talking about passive products. They have to hold the shares. They can scream, but unless they can get a majority of votes not much is likely to happen.

One should not confuse trying to change the world with owning SRI/ ESG index funds. The latter might make one feel good, and it might be a good investment strategy (owning Facebook, say, but not Exxon; News Corp and not BP), but it's not likely to change the world.
Valuethinker
Posts: 49035
Joined: Fri May 11, 2007 11:07 am

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by Valuethinker »

I have read around a bit more about this subject.

I am reasonably convinced that activist funds, that take stakes in companies and try to force changes, do have an effect on public companies. Even if directors seldom get fired, and activist-sponsored directors seldom get appointed, big public companies are sensitive to their reputation.

For me the problem comes with the degree of shareholder activism of passive funds.

I don't have a full assessment of this, but to my mind the effect is not going to be large. Even the largest managers don't necessarily have the resources to pursue engagement with Boards of Directors - a costly and time consuming exercise.

However that's certainly an area where I do not feel that I know enough.

My main concern with SRI/ ESG passive products is that they are "feel good" not "do good" products.

But I am not sure what the evidence is. This is a rapidly growing field of investment - one where Europe, unusually, leads the USA.
Laurizas
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Location: Lithuania

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by Laurizas »

Valuethinker wrote: Mon Oct 25, 2021 3:37 am For me the problem comes with the degree of shareholder activism of passive funds.
I don't have a full assessment of this, but to my mind the effect is not going to be large. Even the largest managers don't necessarily have the resources to pursue engagement with Boards of Directors - a costly and time consuming exercise.
Agree, if it was large, we would know. This topic needs academic research.
id_afstand
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Location: The Netherlands

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by id_afstand »

Betelgeuse79 wrote: Wed Oct 20, 2021 3:18 am Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating (IE00BNG8L278).
As a Dutch investor, you could consider NT World ESG, NT EM ESG and NT SC ESG funds that are available through large system banks (Rabo, ING and ABN). These funds have ESG screens, but ensure that there is no dividend leakage. On average, Irish all world funds pay 12% tax on the dividend, which translates now into some 0,2% extra unrecoverable costs. NT funds rebate these costs and for Dutch investors are considerably cheaper than Irish alternatives. You may find Northern Trust more attractive as they generally vote more green as shareholder compared to Vanguard.

I am personally strongly against ESG. I find it morally unacceptable and disgusting that we are forced into "virtues": in the Netherlands there is no index fund without an ESG screen! So, you must not invest in Airbus, Boeing, Shell (but you invest in BP). The fund management industry invents stories and finds a way to parasite on the, in my view, very naïve do good desire of the population.

It is no good for the world, and no good for you as investor, dirty companies are just pushed into private equity, or let reap some higher expected returns by the people that are less idealistic. You get higher costs, higher turnover (also costs) and you don't understand what is excluded, as well as you don't have a possibility to push companies into the direction that is in line with your conscience.
webkonsola
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Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by webkonsola »

This post https://www.bankeronwheels.com/review- ... -all-cap/ is an interesting comparison vs. the non-ESG fund but also the iShares that are affected by ESG Ratings.

In a prior post of this series (https://www.bankeronwheels.com/the-defi ... investing/), it is explained why financially material ESG Ratings have almost no impact on the planet.
JasonHutt
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Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by JasonHutt »

Betelgeuse79 wrote: Wed Oct 20, 2021 4:48 am Thanks Laurizas - I am a tax resident of the Netherlands where there are no capital gains taxes, so selling my funds wouldn't trigger a taxable event.

As for the ESG, I am not comfortable owning stakes in industries which are heavy in fossil fuels or controversial weapons. This is a personal choice and I'm aware many disagree that it is even an effective choice at all, but I prefer to stick to it.

In any event, my understanding is that neither Vanguard FTSE All-World nor iShares MSCI ACW hold small caps, which I'm interested in owning. That's why I like Vanguard ESG Global All Cap UCITS ETF (and the ESG criteria this fund applies are much less strict than my current iShares SRI AW fund).
Well, without fossil fuels (especially fertilizer,) Dutch farming will continue its decline.
id_afstand
Posts: 205
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Location: The Netherlands

Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by id_afstand »

JasonHutt wrote: Wed Dec 21, 2022 10:52 pm Well, without fossil fuels (especially fertilizer,) Dutch farming will continue its decline.
This is what the part of society investing in ESG funds wants (less farming).

OP, you may want to consider NT ESG funds instead of Vanguard's offering. NT ESG funds (World, SC, EM) are well diversified and close dividend leakage (so some 30 bps cheaper) than Vanguard. They screen out tobacco, weapons and coal, SC fund screens out carbon-intensive companies.

I myself switched from NT ESG to Vanguard Institutional, paying some 30 bps per year more due to dividend leakage, all this just to avoid ESG (it's a quirk of the Dutch landscape that ESG funds are substantially cheaper). This gives me an accurate following of 99% of world MCW, better funds (at least I can fully understand their annual reports), and no forced virtue, see this topic

viewtopic.php?t=386576
Mors
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Re: Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating

Post by Mors »

I will also suggest the Northern Trust funds.

https://www.abnamro.nl/nl/prive/belegge ... roup=funds

https://www.abnamro.nl/nl/prive/belegge ... roup=funds

https://www.abnamro.nl/nl/prive/belegge ... basis.html

The reduced dividend leakage also makes esg investing cheaper and paradoxically the default way of investing for Dutch tax residents.
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