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Vanguard has backed just 2% of environmental and social shareholder proposals this year as the number of resolutions the asset management giant deems “overly prescriptive” and ultra vires has risen.
The percentage of votes cast on such proposals during the 2023 proxy season is minuscule, down sharply from 12% in 2022, it said on Monday.
Vanguard, with assets worth $7.2 trillion, said many of this year’s shareholder proposals went too far, such as seeking “specific actions by the company, including changes to corporate strategy or operations,” or were redundant.
Vanguard’s support for shareholder resolutions has plummeted following similar disclosures by other large asset managers such as BlackRock and State Street.
Last week, BlackRock, the world’s largest money manager, reported that it voted in favor of about 7% of all environmental and social proposals in the 12 months to June, down from 22% last year and 2021 are nearly half in favor.
The drop in support for shareholder proposals is significant: BlackRock, State Street and Vanguard collectively control 15% to 20% of most of the largest public companies in the US because of their large portfolios of index-tracking products and investment funds.
The shift comes at a time when investing based on environmental, social and governance factors has become highly politicized and asset managers have come under attack from Republicans.
Vanguard echoes complaints from other large asset managers that recent SEC policy changes have made it harder for firms to block shareholder proposals, including those that “could be viewed as ‘micromanagement,'” the group said.
Institutional Shareholder Services, a proxy adviser, said a record number of ESG proposals were submitted for a vote this year.
In a report on its voting record, Vanguard said the total number of U.S. environmental and social proposals put forward by shareholders rose sharply to 359 from 290 in 2022.
The asset manager said the number of shareholder proposals specifically addressing environmental risk increased significantly this proxy season, up 50% to 150 from 100 in the 2022 proxy season. Many of these focus on setting emissions and fossil fuel financing targets.
In December, Vanguard pulled out of a major financial alliance aimed at urging companies to tackle climate change, saying it preferred to tackle the issue independently.
During the environmental and social voting process, fund managers voted on 274 proposals related at least in part to social issues, such as racial equality, reproductive rights, unions, worker safety and the pay gap.
Vanguard attributes increased shareholder interest in the company’s operations and voting to the fact that companies are now disclosing more information about environmental and social risks.
Contrary to its actions on shareholder proposals, Vanguard voted in favor of 94% of environmental and social proposals put forward by company management this year.
The fund manager said that while some shareholder proposals pointed to “significant risks” facing the company, it “does not support proposals that go beyond disclosure and infringe on the company’s strategy and operations”.
“We continue to believe that strategies and tactics that maximize the long-term return on investment for a company and its shareholders should be determined by its board and management team,” Vanguard said.
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