Private prison operator, Geo Group, gun manufacturer, Strum Ruger, and Rupert Murdoch’s media groups, including Fox and News Corp, are among a number of stocks that have been thrown out of Vanguard funds created to invest in companies with strong environmental, social and governance records. Vanguard stated there was an issue in the screening methodology used by their benchmark provider, FTSE Russell. FTSE has since implemented additional oversight and controls to ensure the benchmark aligns with its objective. Marketing materials for the funds say they “specifically exclude” companies that profit from adult entertainment, alcohol and tobacco, weapons, fossil fuels, gambling, and nuclear power, as well as companies that “do not meet standards of UN global compact principles” or fail “diversity criteria”. Vanguard and FTSE have not elaborated on which specific criteria any of the stocks failed to meet. The indexing error affected the $544 million Vanguard ESG US Stock ETF and the $386 million Vanguard ESG International Stock ETF, which held shares from June 21 2019, and August 5 2019.

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Financial Times