Home | Blog | Vanguard: Walden Asset Management ESG engagement success
Sustainable investment specialist, Walden Asset Management, has withdrawn a resolution due to be voted on at a Vanguard mutual fund meeting in November. The resolution had challenged the proxy voting records on shareholder resolutions addressing significant social and environmental issues.
As one of the largest fund managers in the world Vanguard’s proxy voting record has been under increasing scrutiny. Walden said it had engaged with a number of investment managers and mutual funds on their proxy voting practices and in 2017, it had filed resolutions with two Vanguard equity index funds that requested a review of their proxy voting at portfolio companies, particularly on shareholder resolutions focused on climate change. Walden said mutual funds are not required to hold annual meetings for investors, but Vanguard scheduled a November meeting for other reasons, which had set up the opportunity for a vote on its resolution.
This triggered increased engagement between Walden and Vanguard. This has led to Vanguard stating its intention to expand reporting on company engagement priorities such as climate change, board diversity, and corporate governance. Walden said that, “In light of ongoing conversations as well as changes in Vanguard’s voting approach, Walden withdrew the resolution that had included several individual co-filers.”
Glenn Booraem, the Vanguard Funds’ investment stewardship officer, said: “Climate change represents an evolving set of risks and opportunities for companies in many sectors. Vanguard has prioritised climate risk on our engagement agenda, and we have discussed the topic with more companies over the past year than ever before.
“Just as we’ve long espoused the value of engagement between institutional investors and portfolio companies, so too do we recognise the value of dialogue among investors on issues of common concern. The resolution that we’ve reached with Walden is evidence of engagement in action. Walden’s request also coincided with our plans for more comprehensive reporting on our investment stewardship activities; the first iteration of our expanded reporting will be published later this month, coincident with the annual filing of our proxy voting records. This report will feature deeper discussion of our thinking on climate risk and gender diversity on boards (as two issues on which we expect continuing focus), as well as expanded anecdotal discussion of specific engagements, voting rationale, and vote decisions.
“We appreciate the productive dialogue we’ve had with Walden on this matter, and we look forward to ongoing engagement with shareholders and portfolio companies on these and other matters of significance to long-term value that emerge over time.”
Tim Smith, director of ESG Shareowner Engagement, at Walden said: “We are pleased that Vanguard is championing climate risk and board diversity in its numerous engagements with companies. This includes Vanguard’s proxy votes this spring supporting shareholder resolutions on climate change at Exxon Mobil and Occidental Petroleum, helping drive majority votes at both companies and a high support level of 62% at Exxon Mobil.”
Smith added that Vanguard also voted in favour of some resolutions on board diversity, sending a strong message to companies that they need to take more aggressive action to increase diverse representation on boards along multiple dimensions including gender and ethnicity. He said that Vanguard’s voting record that will soon be released in its N-PX filings will show how that Vanguard has begun to vote for social and environmental resolutions in some cases. However, Smith argued that the record of improvement was not substantial enough, as Vanguard still did not support the vast majority of environmental and social issue resolutions on matters of significant concern to a growing number of investors.