Vanguard Gets More Aggressive on Corporate Climate Risk

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By Andrea Vittorio

Vanguard Group says it’s raised risks from climate change in talks with more companies over the past year than ever before.

Some of those behind-the-scenes climate conversations made companies the mutual fund giant invests in pledge better board oversight and better reporting on long-term business impacts. Others like Exxon Mobil Corp. and Occidental Petroleum Corp. that weren’t willing to give in were met with unprecedented public votes in favor of climate disclosure.

“The shareholder value case for additional disclosure, where warranted, we think is growing stronger,” Glenn Booraem, Vanguard’s investment stewardship officer, told Bloomberg BNA.

The world’s second-largest asset manager announced Aug. 14 that it will say more on the topic of climate risk later this month after fund participants led by Walden Asset Management challenged its record of proxy voting on the subject.

Vanguard had tended to vote in line with management or not at all when shareholders voiced climate concerns. That is until this year, when Vanguard joined other big investors in overriding boards to pass climate proposals for the first time.

Vote Storytelling

That shift in support is “highly significant,” said Timothy Smith, who leads Walden Asset Management’s shareholder engagement. Still, he called Vanguard’s voting “a work in progress,” since it’s supporting some, but not all, of the climate-related resolutions brought forth by shareholders.

Walden’s request for a climate vote review was set to go to a vote of its own at a rare meeting of Vanguard shareholders later this year. It’s been withdrawn now that Vanguard plans to provide more insight into its thinking on climate risk and gender diversity, another topic where large asset managers such as BlackRock Inc. and State Street are increasingly using their votes to send a message to overwhelmingly male boards.

Booraem said the two issues have driven “a significant part” of Vanguard’s dialogue with companies over the past year and will continue to do so going forward. Vanguard will provide more details on those discussions and vote decisions by the end of August, the same time mutual funds are required to show their voting records each year.

“It’s in their interest to tell their story better,” Smith told Bloomberg BNA. “They were doing a lot of this but hadn’t been telling their story.”

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

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