Fund Name SRI Style Product Region Asset Type Launch Date
Vanguard SRI European Stock Index Fund Limited Exclusions SICAV/Offshore* Europe Passive Equity 29/06/10

Objectives

The Fund seeks to provide long-term growth of capital by seeking to achieve the performance of the Index (the FTSE Developed Europe Index).

Fund Size: £477.10m

Total screened & themed / SRI assets: £27958.00m

Total Responsible Ownership assets: £3611698.10m

Total assets under management: £5814788.30m

As at: 31/03/23

ISIN: IE00B76VTL96, IE00B76VTR58, IE00B526YN16, IE00BFPM9R58, IE00BPT2BL97, IE00B4Z8LP80


Contact: UK_internals@vanguard.com

Sustainable, Responsible &/or ESG Overview

The Fund promotes environmental and social characteristics by excluding companies from its portfolio based on the impact of their conduct or products on society and / or the environment. This is met by not holding stocks of companies in the Index that do not meet specific “socially responsible” criteria, as described below. Socially responsible investing (“SRI”) is broadly defined as an investment approach that aims to integrate social, environmental, and ethical considerations into investment selection. The Index provider has developed a customized SRI screening process designed to analyse companies issuing securities in the Index. The SRI screening process, which excludes Index constituents that are or have engaged in activities that result in serious violations of the United Nations Global Compact (“UNGC”), is consistent with the characteristics promoted by the Fund. The UNGC is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with universally accepted principles in the areas of human rights, labour, the environment and anti-corruption.

Primary fund last amended: 04/03/24 11:21

Information received directly from Fund Manager

Please select what you would like to read:
  • Fund Filters

    Sustainability

    UN Global Compact linked exclusion policy

    Encourage more sustainable practices through stewardship

    Climate Change & Energy

    Nuclear exclusion policy

    Coal, oil & / or gas majors excluded

    Invests in clean energy / renewables

    Fossil fuel reserves exclusion

    Encourage transition to low carbon through stewardship activity

    Fossil fuel exploration exclusion - direct involvement

    Fossil fuel exploration exclusion – indirect involvement

    Human Rights

    Modern slavery exclusion policy

    Social / Employment

    Mining exclusion

    Ethical Values Led Exclusions

    Tobacco production avoided

    Armaments manufacturers avoided

    Alcohol production excluded

    Gambling avoidance policy

    Pornography avoidance policy

    Civilian firearms production exclusion

    Governance & Management

    Anti-bribery and corruption policy

    Encourage board diversity e.g. gender

    Encourage TCFD alignment for banks & insurance companies

    Encourage higher ESG standards through stewardship activity

    Fund Governance

    ESG integration strategy

    ESG factors included in Assessment of Value (AoV) report

    Asset Size & Metrics

    Over 50% large cap companies

    Invests in small, mid and large cap companies

    Invests mostly in large cap companies

    How The Fund Works

    Negative selection bias

    Norms focus

    Combines ESG strategy with other SRI criteria

    Passive / index driven strategy

    Data led strategy

    Focus on ESG risk mitigation

    SRI / ESG / Ethical policies explained on website

    All assets (except cash) meet published sustain'y criteria

    Impact Methodologies

    Aim to deliver positive impacts through engagement

    Labels & Accreditations

    SFDR Article 8 fund / product (EU)

    Intended Clients & Product Options

    Intended for investors interested in ESG / sustainability

    Available via an ISA (OEIC only)

    Portfolio SRI / ESG options available (DFMs)

    Multiple SRI / ESG portfolio options available (DFMs)

    Fund management company information

    About The Business

    ESG / SRI engagement (AFM company wide)

    Responsible ownership / stewardship policy (AFM company wide)

    Responsible ownership policy for non SRI funds (AFM company wide)

    Responsible ownership / ESG a key differentiator (AFM company wide)

    Diversity, equality & inclusion engagement policy (AFM company wide)

    Vote all* shares at AGMs / EGMs (AFM company wide)

    Integrates ESG factors into all / most fund research

    In-house diversity improvement programme (AFM company wide)

    Vulnerable client policy on website (AFM company wide)

    Invests in newly listed companies (AFM company wide)

    Invests in new sustainability linked bond issuances (AFM company wide)

    Resources

    In-house responsible ownership / voting expertise

    Employ specialist ESG / SRI / sustainability researchers

    Use specialist ESG / SRI / sustainability research companies

    Collaborations & Affiliations

    PRI signatory

    Accreditations

    UK Stewardship Code signatory (AFM company wide)

    PRI A+ rated (AFM company wide)

    Engagement Approach

    Regularly lead collaborative ESG initiatives (AFM company wide)

    Encourage responsible corporate taxation (AFM company wide)

    Engaging on climate change issues

    Engaging with fossil fuel companies on climate change

    Engaging to reduce plastics pollution / waste

    Engaging to encourage responsible mining practices

    Engaging on biodiversity / nature issues

    Engaging on human rights issues

    Engaging on labour / employment issues

    Engaging on diversity, equality and / or inclusion issues

    Engaging on governance issues

    Engaging on mental health issues

    Engaging on responsible supply chain issues

    Engaging to encourage a Just Transition

    Company Wide Exclusions

    Controversial weapons avoidance policy (AFM company wide)

    Do not invest in companies with fossil fuel reserves

    Climate & Net Zero Transition

    Encourage carbon / greenhouse gas reduction (AFM company wide)

    Working towards a ‘Net Zero’ commitment (AFM company wide)

    Carbon transition plan published (AFM company wide)

    Carbon offsetting – do NOT offset carbon as part of net zero plan (AFM company wide)

    In-house carbon / GHG reduction policy (AFM company wide)

    Publish 'CEO owned' Climate Risk policy (AFM company wide)

    Net Zero - have set a Net Zero target date (AFM company wide)

    Voting policy includes net zero targets (AFM company wide)

    Transparency

    Publish full voting record (AFM company wide)

    Publish responsible ownership / stewardship report (AFM company wide)

    Full SRI policy information on company website

    Full SRI policy information available on request

  • Sustainable, Responsible &/or ESG Policy:

    Please refer to the answer provided in the “Overview” section

     

     

  • Process

    The investment approach for our equity SRI fund is based on the below exclusion process:

    • FTSE - provides the benchmark and identifies the securities for exclusion.
    • Vanguard - given the excluded securities, optimises the fund to track the broad market.
    • Investor - gains broad market exposure with SRI exclusions.


    The Vanguard SRI European Stock Fund seeks to provide long-term capital growth by seeking to achieve the performance of the FTSE Developed Europe Index, which is comprised of large and mid-sized company stocks in developed markets in Europe.

    The fund attempts to:

    • Match the risk factor exposures of the index by investing in a representative sample of the securities that make up the index, excluding any securities which do not meet socially responsible investing criteria. The criteria take into consideration environmental, social and ethical factors as determined by the index provider and exclude stocks that violate UNGC principles and stocks of companies involved in making controversial weapons and tobacco products.
    • Remain fully invested except in extraordinary market, political or similar conditions. The SRI screening process, which excludes index constituents that are or have engaged in activities that result in serious violations of the UNGC, is consistent with the characteristics promoted by the fund. For further information on the fund’s objectives, please refer to our website.

    EIG’s process initiates after the nightly batch cycles complete, which includes portfolio risk monitoring (post-trade compliance).


    Start-of-day controls

    The following controls are performed by our portfolio managers:

    • Investment tolerances: Start of day and end of day review of several investment tolerances including tracking error and liquidity, as well as sector and issuer active weights.
    • Cash flow projection: Daily review of the portfolio’s net cash flow (e.g. client subscriptions and redemptions as well as dividends).
    • Index activity: Regular review of index provider updates, including information about corporate actions and rebalancing. Portfolio managers also provide additional oversight of the controls that are performed periodically by Global Investment Data Management (GIDM), which ensure that index data in our portfolio management system matches that of the provider’s published index.
    • Guidelines: Daily review of start of day and end of day deviation metrics, which compare portfolio positions (by security) with index weights to ensure portfolios remain in line with their respective index; only very small deviations may be permitted, to ensure minimal tracking error.

     

    Portfolio review and construction

    Vanguard’s portfolio managers begin their day reviewing the abovementioned metrics to confirm start-of-day positions are in line. Portfolios must be adjusted for cash impacts related to index changes and corporate actions. Intraday cash flows are systematically fed into our proprietary portfolio management tool and cash is invested in line with the benchmark using a combination of equities, futures or a combination of both. Finally, the portfolio managers must rebalance each fund on a quarterly basis due to index rebalances.

    EIG uses a third-party optimisation tool, Axioma, to support portfolio construction for optimised strategies. Characteristics and fundamental factors, such as industry, currency, country, size, price-to-earnings ratio, yield, debt-to-assets ratio and beta are considered in the optimisation process. Trade list generation and fund cash flows are managed using these tools.


    Buy and sell discipline

    For Vanguard’s passively managed index funds, our buy and sell discipline is applied with the objective of maintaining portfolio holdings that match the risk characteristics of the benchmark as closely as possible, thereby minimising tracking error. Portfolio managers are responsible for security selection and portfolio construction, working as part of a team and basing their decisions on comprehensive buy/sell decision rules.

    Fund investment decisions are a function of a daily analysis of cash flow (e.g. subscriptions, redemptions and dividends), corporate actions and index changes. Additionally, portfolio managers review daily reconciliation and deviation reports (which compare each portfolio’s positions to its index), as well as each fund’s risk/return profile. When required, securities are traded using proprietary software to bring portfolios back into line. Vanguard has several layers of monitoring and uses risk controls to ensure portfolios track their indices appropriately.

    Our investment framework was created to minimise costs, risks and tracking error and to take into consideration future events. Vanguard’s portfolio managers work within set policies and guidelines; any deviation must be justified and have clear rationale. Our Investment Risk Management group evaluates performance and risk characteristics of all portfolios and works closely with the portfolio managers to help ensure that risks are understood and are managed in accordance with established guidelines. PRD works in conjunction with each fund’s board of directors to monitor portfolios, ensuring portfolios adhere to defined objectives. The team reviews performance regularly – generally on a weekly, monthly and quarterly schedule.

     

    Derivatives usage

    Vanguard does not use derivatives for leverage or speculation. We use derivatives only in circumstances where they offer the most cost-effective means of improving a portfolio’s risk profile. We always compare the cost of the derivative to the cost of constructing an equivalent position in traditional securities. We take a conservative approach to the use of derivatives and operate with closely monitored internal maximum limits.

    We use a number of systems to manage derivatives. Software applications from third parties and those developed on a proprietary basis are used for trade execution and position management. Also, derivative positions are incorporated into portfolio management systems that manage a fund's positions as a whole in both derivatives and conventional securities. Our fund accounting department monitors daily contracts and margins.

    A team process guides the trading and monitoring of our derivatives positions. Many eyes are focused on derivatives exposures to ensure that the portfolios’ positions remain within the agreed-upon tolerance levels, including the following:

    • Index portfolio managers
    • Index traders
    • Dedicated derivatives traders
    • Risk Management Group


    For our equity index portfolios, we typically use futures contracts, which allow us to remain 100% invested while freeing up cash for efficient portfolio management purposes (e.g. rebalancing, transitions). A good example is the reinvestment of dividends paid to the fund. Using futures contracts allows dividend receivables to be invested until the dividend payment date; this enables the funds to apply the index methodology consistently, limiting tracking error. Depending on the portfolio, we currently use different contracts, which we trade on a recognised exchange, for example S&P 500, FTSE 100 and Topix among others.

    For our fixed income portfolios, futures, options, swaptions, caps, forwards, interest rate swaps and credit default swaps may be used for duration, yield curve, credit risk, volatility and FX management. We have expertise in their application and risk management.

    We collateralise derivative positions at/or exceeding 100%, subject to the minimum transfer amount. Appropriate collateral instruments include government, corporate and asset-backed securities. The required amount of overcollateralisation increases for non-Treasury securities. Vanguard’s fund accounting department maintains the collateral, with market prices used to value the securities.


    Index selection

    When Vanguard assesses which index to track, we look at our best practices for index construction. Without liquidity, or the ability to be replicated, an index would fail to be trackable and would fail to meet our requirements and our investors’ needs.

    We rigorously monitor our portfolios by evaluating our fund holdings, our turnover versus the assets we hold and by looking at liquidity thresholds. We stress test our portfolios regularly and these simulations allow us to understand whether we would be affected by situations such as those that arose in 2008 (Lehman's collapse), 1994 (when US rates rose aggressively) and 1987 (when the stock market crashed). There have been no negative findings from these stress tests to date and we will continue this rigorous approach to testing.

    It is important to note that liquidity will always vary across time and market and we try to avoid trading during illiquid times. We follow broad based, diversified benchmarks that exclude some of the most illiquid securities.

     

    Rebalancing considerations

    Through the variety of indices that Vanguard portfolios track and our longstanding experience with equity index providers (e.g. CRSP FTSE, MSCI, S&P, Russell and Wilshire), we have acquired expertise in managing index changes in various equity market segments (global, large-cap, mid-cap and small-cap securities) and market conditions. Constituents of an index and their relative weightings can change over time. When these changes occur, we will review and take action as appropriate for each portfolio on a case by case basis.

    We pay very close attention to these changes and how they affect individual security price movement. We have implemented robust procedures to monitor announcements made by the index providers regarding index changes.

    The index portfolio management team analyses index changes. Our portfolio managers are also traders, allowing for effective implementation of any changes. Based on our analysis of the potential market impact cost vs. tracking risk of every index change, Vanguard may decide it is more prudent to execute some trades at prices other than the closing price of the index change.

    The execution of trading strategies to implement index changes is dependent on the type of change that is taking place. While the bulk of trades are typically conducted at the market close, we recognise these trades can be “costly” and that many clients can tolerate a limited amount of tracking error in order to reduce execution costs. Vanguard regularly executes alternative trading strategies designed to balance clients’ objectives of minimising both potential tracking error and trade execution costs.

    Vanguard equity index portfolios are managed using a daily process. Each portfolio is monitored and rebalanced (if needed) every business day to ensure close tracking to its benchmark index. We typically use index futures contracts to reinvest dividend income or reclaimed tax (if appropriate) in our equity index portfolios. Using index futures contracts works particularly well in this scenario, allowing dividend receivables to be invested until the dividend payment date so that the fund follows the index methodology, limiting tracking error.

     

  • Resources, Affiliations & Corporate Strategies

    There are close to 100 employees who consider ESG as part of their responsibilities. This includes employees in Investment Stewardship who consider ESG issues as part of their daily responsibilities, as well as employees who consider ESG issues as part of their broader role.Our credit analysts develop independent risk assessments and investment opinions for each fixed income issuer. They seek to understand the investment implications of ESG risks and determine whether market pricing adequately reflects these risks.

    Similarly, investment stewardship sector analysts use ESG data and research to inform our active ownership practices, including engagement. In our engagements, we advocate for effective oversight of ESG practices that consistently support the creation of long-term value for investors.

    Representatives from all these groups also sit on our cross-divisional responsible investment team. In recent years, additional staff members were hired to support our approach to analysing ESG risks in our funds.

    The Fixed Income Group (FIG) credit research analysts make use of both internal and external sources for ESG information.Internal resources

    For our active fixed income assets, the team evaluates financial and credit trends across sectors, as well as for individual issuers in which Vanguard invests (or expects to invest). Credit analysts perform an objective, thorough and independent analysis of an issuer’s overall creditworthiness for those securities. This research process may include:

    • Analysis of the issuer’s recent and historical financial statements
    • Sensitivity testing on projected cash flows
    • Discussions with management and/or rating agency analysts
    • Site visits
    • Road show presentations

    These resources are inputs to independent analyses conducted by our team of credit research analysts, which are tailored to each investment opportunity. Our approach carefully considers the investment implications of ESG risk factors along with other risk factors to ensure thorough due diligence is done both prior to initial investment and on an ongoing basis. FIG incorporates the views of our credit analysts within the issuer selection process.

    In addition, credit analysts in FIG use an ESG risk assessment process to flag issuers with material ESG risks. Analysts are responsible for identifying, recording, and monitoring the issuer’s ESG risk and progress toward addressing related issues. This process is overseen by our ESG committee, composed of six members of the global fixed income credit research team. This committee complements our investment decision-making process, including the assessment of ESG risks among other risk assessments conducted by our team of fixed income analysts. The committee is responsible for evaluating external ESG data and research resources used in our investment processes. Team members are also responsible for the continuous improvement in the integration of ESG concepts and department operating procedures.

    External resources

    Our dedicated research team will use information provided by various sources, including the rating agencies (i.e. Moody’s & S&P), Bloomberg, Sustainalytics sell-side research, and issuers. These resources are inputs to independent analyses conducted by our team of credit research analysts, which are tailored to each investment opportunity. Our approach carefully considers the investment implications of ESG risk factors along with other risk factors to ensure thorough due diligence is done both prior to initial investment and on an ongoing basis.

    Participation in industry initiatives

    Vanguard is involved in the following initiatives (year in brackets denotes when we joined or became a signatory):

    • Commonsense Corporate Governance Principles (2016)   Vanguard is a founding member of this initiative. Former Vanguard CEO, Bill McNabb, participated in preparing the Commonsense Principles of Corporate Governance position paper.
    • Sustainability Accounting Standards Board (2016)   Vanguard serves on The Investor Advisory Group.
    • Investor Stewardship Group (2017)   Vanguard is a founding member. We actively promote the framework and engage with companies on its substance.
    • 30% Club (2017)In May 2017, Vanguard joined the 30% Club, a global organisation that advocates for greater representation of women in boardrooms and leadership roles.
    • Principles for Responsible Investment (2014)Vanguard is a signatory and fully committed to the adoption of the principles.
    • International Corporate Governance Network (ICGN) (2019)ICGN is an investor-led organisation with a mission to promote effective standards of corporate governance and investor stewardship to advance efficient markets and sustainable economies worldwide.
    • CDP Global (2018)CDP Climate Change, signatoryCDP Forests, signatoryCDP Water, signatory
    • Council of Institutional Investors (CII) (2017)CII is a non-profit, non-partisan association of corporate, public and union employee benefit funds and endowments with a focused policy mission: to be the leading voice for effective corporate governance practices for US companies and strong shareowner rights and protections.
    • CECP (CEO Force for Good) Strategic Investor InitiativeCo-chaired by Vanguard's former CEO, Bill McNabb, it encourages companies to share their long-term strategic stories and focus more of their disclosure and reporting on sustainable long-term value creation.
    • Embankment Project for Inclusive Capitalism (EPIC) sponsored by the Coalition for Inclusive Capitalism (2018)EPIC was an 18-month long collaborative initiative which brought together professionals from 31 companies, asset managers and asset owners, who worked together to identify and create new metrics in order to demonstrate and measure long-term value in financial markets. Vanguard served as chair of the Existing Initiatives working group.
    • Business Roundtable’s Statement on the Purpose of a Corporation (2019)Vanguard is a signatory.
    • Energy Transition and Care for Our Common Home participant statement (2019)The Vatican’s participant statement on climate risk disclosures calls on companies to be transparent about climate-related matters and disclose them to investors. Vanguard is a signatory.
    • Net Zero Asset Managers initiative (NZAM) (2021)Founded in December 2020, the Net Zero Asset Managers initiative is a group of global asset managers committed to supporting the goal of net zero greenhouse gas emissions, in line with global efforts to limit global warming to 1.5 degrees Celsius and to support investing aligned with net zero emissions, both by 2050 or sooner.

    Vanguard is also supportive of local governance or stewardship codes, such as:

    .

    Important Information

    Confidentiality

    The information contained in this document, including attachments, is confidential information and property of Vanguard Asset Management, Limited, The Vanguard Group, Inc. and their affiliates. The information may not be divulged or communicated to any third parties without the prior written consent of Vanguard Asset Management, Limited, unless it is needed for the execution of the present document or when divulgation is required by law.

    Investment Risk Information

    The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

    Some funds invest in emerging markets which can be more volatile than more established markets. As a result the value of your investment may rise or fall.

    ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid-offer spread which should be considered fully before investing.Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds.

    The funds may use derivatives in order to reduce risk or cost and/or generate extra income or growth. The use of derivatives could increase or reduce exposure to underlying assets and result in greater fluctuations of the funds’ net asset value. A derivative is a financial contract whose value is based on the value of a financial asset (such as a share, bond, or currency) or a market index.

    Some funds invest in securities which are denominated in different currencies. Movements in currency exchange rates can affect the return of investments.For further information on risks please see the “Risk Factors” section of the prospectus on our website at https://global.vanguard.com.

    Disclaimer

    This document is directed at professional investors and should not be distributed to, or relied upon by retail investors.

    For further information on the funds’ investment policies and risks, please refer to the prospectus of the UCITS and to the Key Investor Information Document (“KIID”) before making any final investment decisions. The KIID for this fund is available, alongside the prospectus via Vanguard’s website https://global.vanguard.com/

    This document is designed for use by, and is directed only at, persons resident in the UK.

    The information contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document is general in nature and does not constitute legal, tax or investment advice. Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of units/shares of, and the receipt of distribution from any investment.

    Vanguard Investment Series plc & Vanguard Funds plc have been authorised by the Central Bank of Ireland as a UCITS and have been registered for public distribution in certain EEA countries and the UK. Prospective investors are referred to the funds' prospectus for further information. Prospective investors are also urged to consult their own professional advisers on the implications of making an investment in, and holding or disposing shares of the funds and the receipt of distributions with respect to such shares under the law of the countries in which they are liable to taxation.

    The Manager of Vanguard Investment Series plc is Vanguard Group (Ireland) Limited. Vanguard Asset Management, Limited is a distributor of Vanguard Investment Series plc.

    The Manager of Vanguard Funds plc is Vanguard Group (Ireland) Limited. Vanguard Asset Management, Limited is a distributor for Vanguard Funds plc.

    The Indicative Net Asset Value (iNAV) for Vanguard’s ETFs is published on Bloomberg or Reuters. Refer to the Portfolio Holdings Policy at https://global.vanguard.com/portal/site/portal/ucits-documentation for holdings information.

    The Manager of the Ireland-domiciled funds may determine to terminate any arrangements made for marketing the shares in one or more jurisdictions in accordance with the UCITS Directive, as may be amended from time-to-time.

    For investors in UK-domiciled funds, a summary of investor rights can be obtained via https://global.vanguard.com/portal/site/portal/ucits-investing-with-us and is available in English.

    For investors in Ireland-domiciled funds, a summary of investor rights can be obtained via https://global.vanguard.com/portal/site/portal/ucits-investing-with-us and is available in English, German, French, Spanish, Dutch and Italian.

    The Authorised Corporate Director for Vanguard Investments Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard Investments Funds ICVC.

    London Stock Exchange Group companies include FTSE International Limited ("FTSE"), Frank Russell Company ("Russell"), MTS Next Limited ("MTS"), and FTSE TMX Global Debt Capital Markets Inc. ("FTSE TMX"). All rights reserved. "FTSE®", "Russell®", "MTS®", "FTSE TMX®" and "FTSE Russell" and other service marks and trademarks related to the FTSE or Russell indexes are trademarks of the London Stock Exchange Group companies and are used by FTSE, MTS, FTSE TMX and Russell under license. All information is provided for information purposes only. No responsibility or liability can be accepted by the London Stock Exchange Group companies nor its licensors for any errors or for any loss from use of this publication. Neither the London Stock Exchange Group companies nor any of its licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Indexes or the fitness or suitability of the Indexes for any particular purpose to which they might be put.

    "Bloomberg®" and Bloomberg EUR Non-Government Float Adjusted Bond Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited ("BISL"), the administrator of the index (collectively, "Bloomberg") and have been licensed for use for certain purposes by Vanguard. Bloomberg is not affiliated with Vanguard, and Bloomberg does not approve, endorse, review, or recommend Vanguard SRI Euro Investment Grade Bond. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to Vanguard SRI Euro Investment Grade Bond.

    SEDOL and SEDOL Masterfile® are registered trademarks of the London Stock Exchange Group PLC. SEDOL Data has been provided from the London Stock Exchange's SEDOL Masterfile®

    Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority.

    © 2022 Vanguard Asset Management, Limited. All rights reserved

     

  • Dialshifter

    Our organisation is helping to support the Paris Climate Agreement and the Race to Net Zero by…

    Please refer to our website:

    https://corporate.vanguard.com/content/corporatesite/us/en/corp/who-we-are/we-care-about/sustainability.html

Fund Name DS SRI Style Product Region Asset Type Launch Date
Vanguard SRI European Stock Index Fund Limited Exclusions SICAV/Offshore* Europe Passive Equity

Fund Size: £477.10

Total screened & themed / SRI assets: £27958.00

Total Responsible Ownership assets: £3611698.10

Total assets under management: £5814788.30

As at: 31/03/23

Sustainable, Responsible &/or ESG Policy:

Please refer to the answer provided in the “Overview” section

 

 

Sustainable, Responsible &/or ESG Process:

The investment approach for our equity SRI fund is based on the below exclusion process:

  • FTSE - provides the benchmark and identifies the securities for exclusion.
  • Vanguard - given the excluded securities, optimises the fund to track the broad market.
  • Investor - gains broad market exposure with SRI exclusions.


The Vanguard SRI European Stock Fund seeks to provide long-term capital growth by seeking to achieve the performance of the FTSE Developed Europe Index, which is comprised of large and mid-sized company stocks in developed markets in Europe.

The fund attempts to:

  • Match the risk factor exposures of the index by investing in a representative sample of the securities that make up the index, excluding any securities which do not meet socially responsible investing criteria. The criteria take into consideration environmental, social and ethical factors as determined by the index provider and exclude stocks that violate UNGC principles and stocks of companies involved in making controversial weapons and tobacco products.
  • Remain fully invested except in extraordinary market, political or similar conditions. The SRI screening process, which excludes index constituents that are or have engaged in activities that result in serious violations of the UNGC, is consistent with the characteristics promoted by the fund. For further information on the fund’s objectives, please refer to our website.

EIG’s process initiates after the nightly batch cycles complete, which includes portfolio risk monitoring (post-trade compliance).


Start-of-day controls

The following controls are performed by our portfolio managers:

  • Investment tolerances: Start of day and end of day review of several investment tolerances including tracking error and liquidity, as well as sector and issuer active weights.
  • Cash flow projection: Daily review of the portfolio’s net cash flow (e.g. client subscriptions and redemptions as well as dividends).
  • Index activity: Regular review of index provider updates, including information about corporate actions and rebalancing. Portfolio managers also provide additional oversight of the controls that are performed periodically by Global Investment Data Management (GIDM), which ensure that index data in our portfolio management system matches that of the provider’s published index.
  • Guidelines: Daily review of start of day and end of day deviation metrics, which compare portfolio positions (by security) with index weights to ensure portfolios remain in line with their respective index; only very small deviations may be permitted, to ensure minimal tracking error.

 

Portfolio review and construction

Vanguard’s portfolio managers begin their day reviewing the abovementioned metrics to confirm start-of-day positions are in line. Portfolios must be adjusted for cash impacts related to index changes and corporate actions. Intraday cash flows are systematically fed into our proprietary portfolio management tool and cash is invested in line with the benchmark using a combination of equities, futures or a combination of both. Finally, the portfolio managers must rebalance each fund on a quarterly basis due to index rebalances.

EIG uses a third-party optimisation tool, Axioma, to support portfolio construction for optimised strategies. Characteristics and fundamental factors, such as industry, currency, country, size, price-to-earnings ratio, yield, debt-to-assets ratio and beta are considered in the optimisation process. Trade list generation and fund cash flows are managed using these tools.


Buy and sell discipline

For Vanguard’s passively managed index funds, our buy and sell discipline is applied with the objective of maintaining portfolio holdings that match the risk characteristics of the benchmark as closely as possible, thereby minimising tracking error. Portfolio managers are responsible for security selection and portfolio construction, working as part of a team and basing their decisions on comprehensive buy/sell decision rules.

Fund investment decisions are a function of a daily analysis of cash flow (e.g. subscriptions, redemptions and dividends), corporate actions and index changes. Additionally, portfolio managers review daily reconciliation and deviation reports (which compare each portfolio’s positions to its index), as well as each fund’s risk/return profile. When required, securities are traded using proprietary software to bring portfolios back into line. Vanguard has several layers of monitoring and uses risk controls to ensure portfolios track their indices appropriately.

Our investment framework was created to minimise costs, risks and tracking error and to take into consideration future events. Vanguard’s portfolio managers work within set policies and guidelines; any deviation must be justified and have clear rationale. Our Investment Risk Management group evaluates performance and risk characteristics of all portfolios and works closely with the portfolio managers to help ensure that risks are understood and are managed in accordance with established guidelines. PRD works in conjunction with each fund’s board of directors to monitor portfolios, ensuring portfolios adhere to defined objectives. The team reviews performance regularly – generally on a weekly, monthly and quarterly schedule.

 

Derivatives usage

Vanguard does not use derivatives for leverage or speculation. We use derivatives only in circumstances where they offer the most cost-effective means of improving a portfolio’s risk profile. We always compare the cost of the derivative to the cost of constructing an equivalent position in traditional securities. We take a conservative approach to the use of derivatives and operate with closely monitored internal maximum limits.

We use a number of systems to manage derivatives. Software applications from third parties and those developed on a proprietary basis are used for trade execution and position management. Also, derivative positions are incorporated into portfolio management systems that manage a fund's positions as a whole in both derivatives and conventional securities. Our fund accounting department monitors daily contracts and margins.

A team process guides the trading and monitoring of our derivatives positions. Many eyes are focused on derivatives exposures to ensure that the portfolios’ positions remain within the agreed-upon tolerance levels, including the following:

  • Index portfolio managers
  • Index traders
  • Dedicated derivatives traders
  • Risk Management Group


For our equity index portfolios, we typically use futures contracts, which allow us to remain 100% invested while freeing up cash for efficient portfolio management purposes (e.g. rebalancing, transitions). A good example is the reinvestment of dividends paid to the fund. Using futures contracts allows dividend receivables to be invested until the dividend payment date; this enables the funds to apply the index methodology consistently, limiting tracking error. Depending on the portfolio, we currently use different contracts, which we trade on a recognised exchange, for example S&P 500, FTSE 100 and Topix among others.

For our fixed income portfolios, futures, options, swaptions, caps, forwards, interest rate swaps and credit default swaps may be used for duration, yield curve, credit risk, volatility and FX management. We have expertise in their application and risk management.

We collateralise derivative positions at/or exceeding 100%, subject to the minimum transfer amount. Appropriate collateral instruments include government, corporate and asset-backed securities. The required amount of overcollateralisation increases for non-Treasury securities. Vanguard’s fund accounting department maintains the collateral, with market prices used to value the securities.


Index selection

When Vanguard assesses which index to track, we look at our best practices for index construction. Without liquidity, or the ability to be replicated, an index would fail to be trackable and would fail to meet our requirements and our investors’ needs.

We rigorously monitor our portfolios by evaluating our fund holdings, our turnover versus the assets we hold and by looking at liquidity thresholds. We stress test our portfolios regularly and these simulations allow us to understand whether we would be affected by situations such as those that arose in 2008 (Lehman's collapse), 1994 (when US rates rose aggressively) and 1987 (when the stock market crashed). There have been no negative findings from these stress tests to date and we will continue this rigorous approach to testing.

It is important to note that liquidity will always vary across time and market and we try to avoid trading during illiquid times. We follow broad based, diversified benchmarks that exclude some of the most illiquid securities.

 

Rebalancing considerations

Through the variety of indices that Vanguard portfolios track and our longstanding experience with equity index providers (e.g. CRSP FTSE, MSCI, S&P, Russell and Wilshire), we have acquired expertise in managing index changes in various equity market segments (global, large-cap, mid-cap and small-cap securities) and market conditions. Constituents of an index and their relative weightings can change over time. When these changes occur, we will review and take action as appropriate for each portfolio on a case by case basis.

We pay very close attention to these changes and how they affect individual security price movement. We have implemented robust procedures to monitor announcements made by the index providers regarding index changes.

The index portfolio management team analyses index changes. Our portfolio managers are also traders, allowing for effective implementation of any changes. Based on our analysis of the potential market impact cost vs. tracking risk of every index change, Vanguard may decide it is more prudent to execute some trades at prices other than the closing price of the index change.

The execution of trading strategies to implement index changes is dependent on the type of change that is taking place. While the bulk of trades are typically conducted at the market close, we recognise these trades can be “costly” and that many clients can tolerate a limited amount of tracking error in order to reduce execution costs. Vanguard regularly executes alternative trading strategies designed to balance clients’ objectives of minimising both potential tracking error and trade execution costs.

Vanguard equity index portfolios are managed using a daily process. Each portfolio is monitored and rebalanced (if needed) every business day to ensure close tracking to its benchmark index. We typically use index futures contracts to reinvest dividend income or reclaimed tax (if appropriate) in our equity index portfolios. Using index futures contracts works particularly well in this scenario, allowing dividend receivables to be invested until the dividend payment date so that the fund follows the index methodology, limiting tracking error.

 

Resources, Affiliations & Corporate Strategies

There are close to 100 employees who consider ESG as part of their responsibilities. This includes employees in Investment Stewardship who consider ESG issues as part of their daily responsibilities, as well as employees who consider ESG issues as part of their broader role.Our credit analysts develop independent risk assessments and investment opinions for each fixed income issuer. They seek to understand the investment implications of ESG risks and determine whether market pricing adequately reflects these risks.

Similarly, investment stewardship sector analysts use ESG data and research to inform our active ownership practices, including engagement. In our engagements, we advocate for effective oversight of ESG practices that consistently support the creation of long-term value for investors.

Representatives from all these groups also sit on our cross-divisional responsible investment team. In recent years, additional staff members were hired to support our approach to analysing ESG risks in our funds.

The Fixed Income Group (FIG) credit research analysts make use of both internal and external sources for ESG information.Internal resources

For our active fixed income assets, the team evaluates financial and credit trends across sectors, as well as for individual issuers in which Vanguard invests (or expects to invest). Credit analysts perform an objective, thorough and independent analysis of an issuer’s overall creditworthiness for those securities. This research process may include:

  • Analysis of the issuer’s recent and historical financial statements
  • Sensitivity testing on projected cash flows
  • Discussions with management and/or rating agency analysts
  • Site visits
  • Road show presentations

These resources are inputs to independent analyses conducted by our team of credit research analysts, which are tailored to each investment opportunity. Our approach carefully considers the investment implications of ESG risk factors along with other risk factors to ensure thorough due diligence is done both prior to initial investment and on an ongoing basis. FIG incorporates the views of our credit analysts within the issuer selection process.

In addition, credit analysts in FIG use an ESG risk assessment process to flag issuers with material ESG risks. Analysts are responsible for identifying, recording, and monitoring the issuer’s ESG risk and progress toward addressing related issues. This process is overseen by our ESG committee, composed of six members of the global fixed income credit research team. This committee complements our investment decision-making process, including the assessment of ESG risks among other risk assessments conducted by our team of fixed income analysts. The committee is responsible for evaluating external ESG data and research resources used in our investment processes. Team members are also responsible for the continuous improvement in the integration of ESG concepts and department operating procedures.

External resources

Our dedicated research team will use information provided by various sources, including the rating agencies (i.e. Moody’s & S&P), Bloomberg, Sustainalytics sell-side research, and issuers. These resources are inputs to independent analyses conducted by our team of credit research analysts, which are tailored to each investment opportunity. Our approach carefully considers the investment implications of ESG risk factors along with other risk factors to ensure thorough due diligence is done both prior to initial investment and on an ongoing basis.

Participation in industry initiatives

Vanguard is involved in the following initiatives (year in brackets denotes when we joined or became a signatory):

  • Commonsense Corporate Governance Principles (2016)   Vanguard is a founding member of this initiative. Former Vanguard CEO, Bill McNabb, participated in preparing the Commonsense Principles of Corporate Governance position paper.
  • Sustainability Accounting Standards Board (2016)   Vanguard serves on The Investor Advisory Group.
  • Investor Stewardship Group (2017)   Vanguard is a founding member. We actively promote the framework and engage with companies on its substance.
  • 30% Club (2017)In May 2017, Vanguard joined the 30% Club, a global organisation that advocates for greater representation of women in boardrooms and leadership roles.
  • Principles for Responsible Investment (2014)Vanguard is a signatory and fully committed to the adoption of the principles.
  • International Corporate Governance Network (ICGN) (2019)ICGN is an investor-led organisation with a mission to promote effective standards of corporate governance and investor stewardship to advance efficient markets and sustainable economies worldwide.
  • CDP Global (2018)CDP Climate Change, signatoryCDP Forests, signatoryCDP Water, signatory
  • Council of Institutional Investors (CII) (2017)CII is a non-profit, non-partisan association of corporate, public and union employee benefit funds and endowments with a focused policy mission: to be the leading voice for effective corporate governance practices for US companies and strong shareowner rights and protections.
  • CECP (CEO Force for Good) Strategic Investor InitiativeCo-chaired by Vanguard's former CEO, Bill McNabb, it encourages companies to share their long-term strategic stories and focus more of their disclosure and reporting on sustainable long-term value creation.
  • Embankment Project for Inclusive Capitalism (EPIC) sponsored by the Coalition for Inclusive Capitalism (2018)EPIC was an 18-month long collaborative initiative which brought together professionals from 31 companies, asset managers and asset owners, who worked together to identify and create new metrics in order to demonstrate and measure long-term value in financial markets. Vanguard served as chair of the Existing Initiatives working group.
  • Business Roundtable’s Statement on the Purpose of a Corporation (2019)Vanguard is a signatory.
  • Energy Transition and Care for Our Common Home participant statement (2019)The Vatican’s participant statement on climate risk disclosures calls on companies to be transparent about climate-related matters and disclose them to investors. Vanguard is a signatory.
  • Net Zero Asset Managers initiative (NZAM) (2021)Founded in December 2020, the Net Zero Asset Managers initiative is a group of global asset managers committed to supporting the goal of net zero greenhouse gas emissions, in line with global efforts to limit global warming to 1.5 degrees Celsius and to support investing aligned with net zero emissions, both by 2050 or sooner.

Vanguard is also supportive of local governance or stewardship codes, such as:

.

Important Information

Confidentiality

The information contained in this document, including attachments, is confidential information and property of Vanguard Asset Management, Limited, The Vanguard Group, Inc. and their affiliates. The information may not be divulged or communicated to any third parties without the prior written consent of Vanguard Asset Management, Limited, unless it is needed for the execution of the present document or when divulgation is required by law.

Investment Risk Information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Some funds invest in emerging markets which can be more volatile than more established markets. As a result the value of your investment may rise or fall.

ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid-offer spread which should be considered fully before investing.Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds.

The funds may use derivatives in order to reduce risk or cost and/or generate extra income or growth. The use of derivatives could increase or reduce exposure to underlying assets and result in greater fluctuations of the funds’ net asset value. A derivative is a financial contract whose value is based on the value of a financial asset (such as a share, bond, or currency) or a market index.

Some funds invest in securities which are denominated in different currencies. Movements in currency exchange rates can affect the return of investments.For further information on risks please see the “Risk Factors” section of the prospectus on our website at https://global.vanguard.com.

Disclaimer

This document is directed at professional investors and should not be distributed to, or relied upon by retail investors.

For further information on the funds’ investment policies and risks, please refer to the prospectus of the UCITS and to the Key Investor Information Document (“KIID”) before making any final investment decisions. The KIID for this fund is available, alongside the prospectus via Vanguard’s website https://global.vanguard.com/

This document is designed for use by, and is directed only at, persons resident in the UK.

The information contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document is general in nature and does not constitute legal, tax or investment advice. Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of units/shares of, and the receipt of distribution from any investment.

Vanguard Investment Series plc & Vanguard Funds plc have been authorised by the Central Bank of Ireland as a UCITS and have been registered for public distribution in certain EEA countries and the UK. Prospective investors are referred to the funds' prospectus for further information. Prospective investors are also urged to consult their own professional advisers on the implications of making an investment in, and holding or disposing shares of the funds and the receipt of distributions with respect to such shares under the law of the countries in which they are liable to taxation.

The Manager of Vanguard Investment Series plc is Vanguard Group (Ireland) Limited. Vanguard Asset Management, Limited is a distributor of Vanguard Investment Series plc.

The Manager of Vanguard Funds plc is Vanguard Group (Ireland) Limited. Vanguard Asset Management, Limited is a distributor for Vanguard Funds plc.

The Indicative Net Asset Value (iNAV) for Vanguard’s ETFs is published on Bloomberg or Reuters. Refer to the Portfolio Holdings Policy at https://global.vanguard.com/portal/site/portal/ucits-documentation for holdings information.

The Manager of the Ireland-domiciled funds may determine to terminate any arrangements made for marketing the shares in one or more jurisdictions in accordance with the UCITS Directive, as may be amended from time-to-time.

For investors in UK-domiciled funds, a summary of investor rights can be obtained via https://global.vanguard.com/portal/site/portal/ucits-investing-with-us and is available in English.

For investors in Ireland-domiciled funds, a summary of investor rights can be obtained via https://global.vanguard.com/portal/site/portal/ucits-investing-with-us and is available in English, German, French, Spanish, Dutch and Italian.

The Authorised Corporate Director for Vanguard Investments Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard Investments Funds ICVC.

London Stock Exchange Group companies include FTSE International Limited ("FTSE"), Frank Russell Company ("Russell"), MTS Next Limited ("MTS"), and FTSE TMX Global Debt Capital Markets Inc. ("FTSE TMX"). All rights reserved. "FTSE®", "Russell®", "MTS®", "FTSE TMX®" and "FTSE Russell" and other service marks and trademarks related to the FTSE or Russell indexes are trademarks of the London Stock Exchange Group companies and are used by FTSE, MTS, FTSE TMX and Russell under license. All information is provided for information purposes only. No responsibility or liability can be accepted by the London Stock Exchange Group companies nor its licensors for any errors or for any loss from use of this publication. Neither the London Stock Exchange Group companies nor any of its licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Indexes or the fitness or suitability of the Indexes for any particular purpose to which they might be put.

"Bloomberg®" and Bloomberg EUR Non-Government Float Adjusted Bond Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited ("BISL"), the administrator of the index (collectively, "Bloomberg") and have been licensed for use for certain purposes by Vanguard. Bloomberg is not affiliated with Vanguard, and Bloomberg does not approve, endorse, review, or recommend Vanguard SRI Euro Investment Grade Bond. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to Vanguard SRI Euro Investment Grade Bond.

SEDOL and SEDOL Masterfile® are registered trademarks of the London Stock Exchange Group PLC. SEDOL Data has been provided from the London Stock Exchange's SEDOL Masterfile®

Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority.

© 2022 Vanguard Asset Management, Limited. All rights reserved

 

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