Vanguard Group on Monday said it has urged companies to disclose how climate change could affect their business and asset valuations, reflecting how the environment has become a priority for the investment industry.
Under pressure from investors, Vanguard and other fund companies have pushed to pass several high-profile shareholder resolutions on climate risk at big energy firms like Exxon Mobil Corp. and Occidental Petroleum Corp. during the spring proxy season.
Vanguard manages about $4 trillion and is often the top shareholder in big U.S. corporations through its massive index funds — giving it a major voice in setting corporate agendas.
Vanguard, the biggest U.S. mutual fund firm by assets, had not supported climate activists on similar measures. But Glenn Booraem, Vanguard's investment stewardship officer, said in a telephone interview on Monday the issue as well as shareholder proposals have evolved.
"Our support for these proposals is not a matter of ideology, it's a matter of economics," he said. "To the extent there are significant risks to a company's long-term value proposition, we want to make sure there is long-term disclosure of those risks to the market."
Vanguard earlier this year changed its proxy voting policies to give more leeway to support resolutions tied to climate risk, but until now it has given few details about its thinking unlike rivals State Street Corp. or BlackRock Inc.
Vanguard also plans to disclose more details about its talks with companies on issues such as gender diversity on corporate boards.
Booraem said Vanguard does not hear from many of its 20 million investors on governance. He said their views on the environment and diversity, run "along the entire spectrum. That's why we want to approach it from the economic perspective."
Booraem now oversees a staff of more than 20 people focused on governance matters, and said company executives are generally forthcoming about the subjects that once received little corporate attention. "Companies are increasingly receptive to the outreach," he said.
Booraem declined to discuss the reasoning behind Vanguard's votes at Exxon and elsewhere until the tallies are made public in filings due later this month.
He cautioned that upcoming filings detailing Vanguard's overall voting during the spring proxy season would not show much change compared to past years, and declined to discuss future votes it might cast. The firm previously did not support any climate proposals that were opposed by management, and only backed a few this year. Funds run by State Street backed climate resolutions about half the time last year, according to researcher Proxy Insight.
Vanguard's stance and promise of more disclosures prompted activist fund firm Walden Asset Management of Boston to withdraw a shareholder proposal for its upcoming fund meetings, requesting a review of Vanguard's proxy voting.
Walden is "pleased" with the changes, but they have not gone far enough, said Tim Smith, the firm's director of shareowner engagement. Walden will continue to press Vanguard and other fund managers on climate change and other issues, he said.
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