(Bloomberg) — About 40,000 individual investors in Vanguard Group index-tracking funds participated in a pilot program that allowed them to make their views known on important issues facing shareholders.
Approximately 25% of them chose to vote their shares in accordance with the recommendations from proxy advisor Glass, Lewis & Co. on ESG-related issues such as better climate disclosures. In contrast, the vast majority of participants in the pilot decided to stick with whatever the companies or Vanguard's management team are advocating.
In the last proxy season, Vanguard reported that it did not back down any environmental or social resolutions submitted by external shareholders. The results show that the program had little impact on changing the overall vote count as it relates to ESG issues during a period of Republican-led opposition to the investment strategy.
John Galloway, Vanguard's global head of investment management, said the program has succeeded in giving clients a voice in the voting process. The firm plans to add more U.S. equity index funds over time so more individual investors can “align their investment portfolios with their personal preferences,” he said.
“We are committed to continuing to empower investors by expanding access to the proxy voting process,” Galloway said.
The pilot program was open to a total of two million individual investors in five equity index funds that have combined assets under management of more than $100 billion.
One of the funds involved was the US exchange-traded fund Vanguard ESG (ticker: ESGV). More than three-quarters of ETF investors who participated in the pilot program supported Glass Lewis' guidelines, Galloway said. The example shows how investors with special interests are making their views heard through the proxy process, he said.
In the pilot, investors were given four options: They could vote in accordance with what the companies' boards recommend; they can support what Vanguard's stewardship team is advocating; they may decide not to vote at all; or they can support Glass Lewis' position on environmental, social and shareholder governance resolutions.
Vanguard said Tuesday that 30% of its 40,000 investors chose to stick with the companies' recommendations, 43% went with Vanguard's team, 2% decided not to vote and 24% aligned their vote with Glass Lewis.
“Vanguard is showing that it is giving its clients options and not forcing them to simply follow the firm's voting policy,” said Rob Du Boff, senior analyst at Bloomberg Intelligence. “The reality, however, is that it has little impact at the moment in changing the overall number of votes.”
BlackRock Inc. AND State Street Global Advisors also allow investors in index funds to direct proxy voting of their shares. It is attended by clients representing more than $630 billion in assets under management BlackRock's Voting Choice Program and the firm said it is expanding its administration options.
As at Vanguard, approval of environmental and social proposals fell at BlackRock. signature voted for 4% of proposals in the 12 months ended June 30, up from 7% a year earlier.
Read more: BlackRock cuts support for climate, social shareholder proposals
The drop in support represents “a huge gap between what many major asset owners think and how big managers are voting on resolutions,” it said. Heidi Walesexecutive director of the Sustainable Investment Institute. “It's not that climate change management has become less material in the last two or three years, or that the fundamental demographic changes driving human capital and diversity management have changed.”