Description

The Vanguard FTSE Social Index Fund Admiral Shares aims to mirror the investment performance of the FTSE US Choice Index. This index is constructed from large and mid-capitalization stocks, weighted by their market value, and is subject to stringent environmental, social, and corporate governance (ESG) screening. The fund employs a passively managed, full-replication strategy, meaning it seeks to hold all the same securities as its benchmark index in similar proportions. A core principle of this index is the exclusion of companies involved in activities deemed socially irresponsible or controversial. Specifically, the index omits firms with significant engagement in: "Vice" industries: adult entertainment, alcoholic beverages, tobacco products, cannabis cultivation or distribution, and gambling operations. Controversial weaponry: the production of chemical and biological weapons, cluster munitions, anti-personnel landmines, nuclear weapons or components, conventional military weapons, or civilian firearms (including assault weapons and small arms). Fossil fuels and nuclear energy: companies involved in nuclear power generation, or those with substantial proven reserves or operations in coal, oil, and gas exploration, extraction, processing, or distribution, as well as electricity generation from oil, gas, or thermal coal. Beyond these sector-specific exclusions, the index disqualifies companies that fail to adhere to certain fundamental labor rights, human rights, environmental protection standards, or anti-corruption practices. Additionally, firms that do not satisfy specific diversity benchmarks—such as having at least one woman on the board, implementing diversity policies, and establishing diversity management systems—are also excluded. The index provider, FTSE, meticulously evaluates a company's level of involvement, revenue thresholds, and the severity of any controversies to apply these stringent criteria and determine eligibility across all exclusion categories, utilizing detailed internal methodologies. Furthermore, with respect to 75% of its total assets, the fund generally cannot acquire more than 10% of the outstanding voting securities of any single issuer, nor can an investment in any single issuer exceed 5% of the fund's total assets. This rule is waived if necessary to accurately replicate the target index's composition and does not apply to obligations issued by the U.S. government or its agencies.