Dive Brief:
- Vanguard announced Monday that investors in three additional funds will have the opportunity to choose individualized investment and engagement policies as part of the firm’s pilot program for the 2025 proxy season. The pilot will now also allow retirement plan sponsors with eligible funds in their portfolio to participate.
- The pilot program has also added two policy and engagement preferences, one replacing a prior “not voting” option and another offering a third-party option that will focus on “maximizing shareholder value without being influenced by political or social agendas,” according to the Monday release.
- The new third-party “wealth-focused” policy will allow shareholders to vote in accordance with advice from proxy adviser and ratings company Egan-Jones. The proxy adviser’s website states that the plan opposes policies aimed at promoting diversity, equity and inclusion and environmental protection and issues recommendations “based only upon the objective to protect and enhance the wealth of investors.”
Dive Insight:
Vanguard, the nation’s second largest asset manager, initially rolled out the program across three funds in 2023, before expanding to five total eligible funds for the 2024 proxy season. The firm reported in September that 40,000 investors participated in the pilot during the latest proxy season, with a plurality (43%) of participants choosing to follow Vanguard’s advised policy.
Vanguard Global Head of Investment Stewardship John Galloway said in the release that the program is “grounded in the foundational belief that empowering investors to influence how their proxies are voted helps create a healthier corporate governance ecosystem,” and that has influenced the expansion.
“Guided by our mission and legacy of taking a stand for investors, we are committed to continuing to expand Investor Choice in a thoughtful, straightforward, and efficient way so that more and more investors can make their voices heard,” he said.
Replacing its “not voting” preference — which just 2.3% of plan participants chose in 2024 — Vanguard will offer a “mirror policy,” where participants can choose to have their proportion of shares voted “in approximately the same proportions as the votes cast by other shareholders. BlackRock, which has its own investor voting choice pilot program, also added the Egan-Jones policy to its voting options for the 2025 proxy season in June.
In 2024, just under a quarter of Vanguard’s pilot participants (24.4%) decided to utilize a third-party ESG-aligned policy, putting it behind both the Vanguard-advised policy and company board-aligned policy (30.3%) in terms of utilization.
In addition to rolling out the program to investors in Vanguard’s high dividend yield index, tax-managed capital appreciation and tax-managed small cap funds, making the program available to 401k plan sponsors and their participants adds a new dimension, according to Vanguard.
The expansion will bring the total number of eligible investors, advisers and retirement plan sponsors to nearly 4 million across eight funds that represent nearly $250 billion in assets under management as of the end of September, according to the announcement.
While the expansion brings more eligible users, there is no guarantee that investors will decide to participate.
Following the release of Vanguard’s 2024 pilot data, Lindsey Stewart, director of investment stewardship research for Morningstar Sustainalytics, told ESG Dive that the 40,000 pilot participants in 2024 represented a “decent start,” but added that “it’s not a large proportion” of Vanguard’s investors.
