We believe The Vanguard Group (Vanguard) should better align its proxy voting with both its client’s financial interests and its stated ESG commitments.

Vanguard is a member of the Principles for Responsible Investment (PRI), a global network of investors and asset owners representing more than $89 trillion in assets. One of the Principles encourages investors to incorporate ESG considerations into proxy voting.

Vanguard’s stewardship unit votes proxies and has actively supported numerous governance reforms proposed by shareholders, stating it is guided by clients’ economic interests and believes corporate governance practices are one driver of investment performance. We believe issues like climate change can also have a profound impact on shareholder value.

Vanguard’s 2019 Investment Stewardship Report noted that climate risk is becoming a growing focus for the firm’s engagement strategy, evidenced by discussions regarding long-term climate-related risks with 258 companies in carbon intensive industries. In its report, Vanguard states “material risks such as climate…can damage a company’s long-term value. If a company’s practices, organizational culture, or products put people’s health, safety, or dignity at risk, they can pose a financial risk to investors too.”

The firm’s 2018 Investment Stewardship Report features a case study of three climate-related shareholder proposals the firm supported, selected as evidence of Vanguard’s approach to climate risk oversight and strategy. A 2019 Semiannual Engagement Update document highlighted two separate climate-related proposals Vanguard supported.

Vanguard seems concerned about the risks of climate change and the need for urgent action by companies.

Yet its 2019 proxy voting record reveals votes against the majority of climate related resolutions (voting in favor of only 6 of 52 such resolutions), including requests for enhanced disclosure or adoption of greenhouse gas reduction goals, even when independent experts advance a strong business and economic case for support.

In contrast funds managed by investment firms such as Alliance Bernstein, Allianz, Eaton Vance, Legg Mason, MFS, Nuveen, PIMCO, and Wells Fargo supported the majority of climate-related resolutions.

Vanguard’s voting practices appear inconsistent with its statements about the risks to companies posed by climate change and ways business can identify solutions. This contradiction poses reputational risk for the company with both clients and investors. Moreover, such proxy voting practices seem to ignore significant company-specific and economy-wide risks associated with negative impacts of climate change that can have direct impact on shareholder value.

We believe it is Vanguard’s fiduciary responsibility to review how climate change quantitatively affects portfolio companies, evaluate how specific shareholder resolutions on climate relate to shareholder value, and vote accordingly. Thus we request this review of Vanguard’s 2019 proxy voting record.

RESOLVED: Shareowners request that the Board of Directors initiate a review assessing Vanguard’s 2019 proxy voting record and evaluate the Company’s proxy voting policies and guiding criteria related to climate change, including any recommended future changes. A summary report on this review and its findings shall be made available to shareholders and be prepared at reasonable cost, omitting proprietary information.

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