Vanguard Asked to Report on Climate Change Voting

Vanguard: Review Climate Change Voting

Vanguard Asked to Report on Climate Change VotingWalden seeks co-filers for resolutions asking Vanguard to review and report on its proxy voting policies and practices related to climate change.

It is rare when investors file a resolution with a mutual fund since most funds don’t hold regular annual meetings. Nonetheless the act of filing puts the fund on notice that participants are concerned about their voting record on issues like climate change. Tim Smith shared this new resolution with Vanguard, which as many know signed onto the UN’s PRI.

It is significant that investors are questioning their proxy voting record on issues like climate change.

TO: Investors Concerned About Vanguard Proxy Voting Record

FROM: Timothy Smith
Director of ESG Shareowner Engagement
Walden Asset Management

DATE: December 29 , 2016

For a number of years investors and other concerned organizations have raised the issue of Vanguard’s proxy voting record on issues like climate change, political spending and other environmental and social issues. Vanguard does vote for various resolutions seeking corporate governance reforms but never votes for resolutions on environmental and social issues.

Other companies like JPMorgan Chase and Bank of New York Mellon among others, have been pressed on the same point.

And there is reason for optimism. Two or three years ago companies like State Street and Northern Trust voted against all climate resolutions and now they support a healthy percent of them.

This year Walden, its clients and 30 other investors, have together filed resolutions with BlackRock, JPMorgan Chase and Bank of New York Mellon on this issue.

Zevin Asset Management has continued to lead resolutions to T. Rowe Price and Franklin using our voices as stockholders in the company.

As you know, investors do not own stock in Vanguard but we are participants in their mutual funds and thus have a definite “stake” in what they invest in and how they vote their proxies.

While not used frequently, clients can file resolutions with mutual funds in which they invest. This has been done before with Fidelity. However, the mutual fund is not required to hold an annual stockholder meeting unless they are making significant changes requiring a vote by investors in the fund. Thus a fund may not hold a stockholder meeting for a decade or more.

We checked with counsel and affirmed that similar to any of us filing a resolution with a company like IBM, that we can also file with Vanguard in selected equity funds. Then, if they wish, individuals or institutions who invest in Vanguard funds can join as individual co-filers in their own name.

But by filing a resolution and “getting in line” to be included in a future proxy statement, investors are officially confirming to Vanguard and the specific fund that you are questioning their proxy voting policy and practices. The goal here is to demonstrate that investors have deep concerns about their proxy voting record on issues like climate change .

In addition, since there is no official “filing deadline,” an invitation to co-file can be on the table indefinitely allowing investors in selected Vanguard funds, whether an individual or institution, to publicly join in the resolution thus alerting Vanguard to their concerns. And ongoing publicity can highlight that 25 or 50 or more investors are supporting this call.

We invite Vanguard clients in various equity funds concerned about their proxy voting record to join in this initiative.

The process is simple. Just like filing a resolution with a company in which you own stock, you submit a filing letter (see enclosed Walden letter) and the resolution to the Corporate Secretary and copy Walden as the primary filer. We enclose the filing Walden sent to Vanguard today filing with the Vanguard 500 Index Fund (Vanguard – Walden 500 Index Fund cover letter) and Vanguard Total Stock Market Index (Vanguard – Walden total stock market cover letter). Owners of these funds are welcome to join us in co-filing. The same resolution can also be filed with other Vanguard funds where you own stock as an investor.

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