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Mutual fund giant Vanguard Group, at a rare shareholder meeting later this year, will consider an even rarer request from fund participants to review and report on how it casts proxy votes on climate change.
The world’s second-largest asset manager tended to vote in line with management or not at all when shareholders at companies like Exxon Mobil Corp. raised concerns about the financial risks of climate change. That is until this proxy season, when a group of smaller investors led by Walden Asset Management called out Vanguard and other big fund managers for talking about climate risks without wielding their votes on the subject.
Then Vanguard joined BlackRock Inc. and potentially more funds in an unprecedented show of support for shareholders’ climate proposals. Walden, which requested the climate voting report on behalf of clients invested in Vanguard funds, now wants to know why Vanguard seems to have voted for some climate proposals but not others.
Vanguard told investors in a July 13 regulatory filing to oppose Walden’s request because it doesn’t account for advocacy beyond the ballot and it’s “duplicative” of information it provides through mandatory voting disclosures.
Such a request to the fund provider owned by its investors doesn’t happen often. Shareholder meetings at Vanguard don’t happen very often either because they aren’t required unless there’s something up for an investor vote. Its last meeting was in 2009.
Vanguard typically hasn’t supported climate-related shareholder proposals in the past except in cases where a board gave its blessing, according to data provided by Proxy Insight. This year, its fund managers voted for and helped pass over board opposition two proposals seeking climate risk disclosures from Exxon and Occidental Petroleum Corp., Vanguard spokeswoman Arianna Stefanoni Sherlock confirmed to Bloomberg BNA.
Voting isn’t the only way Vanguard advocates on climate risk and other issues that could impact a company’s long-term value or viability. “Vanguard has addressed a range of significant issues, including climate risk, in thousands of discussions over the past several years with an increasing number of companies and their boards,” its trustees said in a preliminary proxy statement.
But, in Walden’s view, the importance of voting shouldn’t be downplayed. “The votes matter,” Timothy Smith, who leads Walden Asset Management’s shareholder engagement, told Bloomberg BNA. “And Vanguard is still at the back of the pack in terms of its voting on environmental and social issues.”
Walden’s resolution lists Morgan Stanley, Goldman Sachs & Co. and State Street Global Advisors among those that have more supportive voting records on climate change. BlackRock shifted its support this year after receiving a similar proposal from Walden and provided new disclosure on its proxy voting decisions. JPMorgan Chase & Co. bowed to the same request.
Fidelity Investments may have changed its votes, too, following an update to its voting guidelines, which were previously silent on environmental and social issues. Vanguard also revised its guidelines to indicate it might support an environmental or social proposal, depending on whether it has a clear link to long-term shareholder value.
One paragraph on environmental and social proposals isn’t enough to satisfy Smith. His push for more climate voting transparency will go to a vote Nov. 15. It’s set to be Vanguard’s last meeting with F. William McNabb as chief executive officer, since he’s stepping down at the end of the year.
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