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Vanguard backed just 2 per cent of environmental and social shareholder proposals this year because of a rise in the number of resolutions the asset management giant considered “overly prescriptive” and overreaching.
The tiny share of votes for such proposals during the 2023 proxy season was down precipitously from 12 per cent in 2022, it said on Monday.
Vanguard, with $7.2tn in assets, said many of the shareholder proposals this year went too far, for example by seeking “specific actions from companies including changes in company strategy or operations”, or were redundant.
The steep drop in Vanguard’s support for shareholder resolutions follows similar disclosures by other large asset managers such as BlackRock and State Street.
Last week BlackRock, the world’s largest money manager, reported it voted in favour of roughly 7 per cent of all environmental and social proposals in the 12 months to June, down from last year when it backed 22 per cent and 2021 when it voted in favour of nearly half.
The declining support for shareholder proposals is significant: together, BlackRock, State Street and Vanguard control between 15 per cent to 20 per cent of most large US public companies because of their huge index-tracking products and investment funds.
The shift comes at a time when investing based on environmental, social and governance factors has become highly politicised and asset managers have come under attack by Republicans.
Vanguard echoed complaints of other large asset managers that recent policy changes by the US Securities and Exchange Commission have made it more difficult for companies to block shareholder proposals, including those that “may be considered ‘micromanagement’”, the group said.
This year brought a record number of ESG proposals up for a vote, according to Institutional Shareholder Services, the proxy adviser.
The total number of US environmental and social proposals offered by shareholders increased significantly this year to 359, up from 290 in 2022, Vanguard said in a report on its voting record.
The number of shareholder proposals specifically concerning environmental risks increased dramatically this proxy season, the asset manager said, up 50 per cent to 150 from 100 during the 2022 proxy season. The focus of many of these was setting targets for emissions and fossil fuel financing.
In December Vanguard left the main financial alliance that seeks to press companies to address climate change, saying it preferred to deal with the issue independently.
In the course of its environmental and social voting, the fund manager voted on 274 proposals that were at least partly related to social issues, which addressed racial equity, reproductive rights, unionisation, worker safety and pay gaps.
Vanguard attributed the increased amount of shareholder interest in company operations and voting to the growing amount of information on environmental and social risks that companies now disclose.
In contrast to its actions on shareholder proposals, Vanguard voted in favour of 94 per cent of environmental and social proposals that were put forth by company management this year.
The fund manager said that while some shareholder proposals identified “material risks” to companies, it “did not support proposals that went beyond disclosure and encroached upon company strategy and operations”.
Vanguard said: “We continue to believe that the strategies and tactics for maximising a company’s and its shareholders’ long-term investment return should be decided by its board and management team.”
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