Vanguard’s new stewardship insight publication on how it evaluates shareholder and management say-on-climate proposals is consistent with February 2021 insights piece on factors it considers in its evaluation of shareholder proposals generally (which we reported on here), i.e., whether the proposal addresses a material issue relevant to the company, whether the proposal advances long-term shareholder interests, and whether the proposal addresses gaps in the company's current practices or stated intentions.
- Vanguard expects boards to effectively oversee material climate-related risks, and to disclose those risks using widely recognized investor-oriented reporting frameworks (e.g., TCFD, which it supports). For those companies where climate change is a material risk, Vanguard expects disclosure of those risks and the company’s climate strategy and progress on goals.
- Vanguard is likely to support management say-on-climate proposals where the company has identified climate change risk as material to its business and is seeking shareholder input on its climate plan. It may support shareholder proposals that request disclosure of material climate-related risks and opportunities that inform decision-making, or that address a gap in the company’s current practices.
- Vanguard evaluates say-on-climate proposals on a case-by-case basis based on its assessment of the materiality of the risks and other factors including the reasonableness of the proposal, whether the requested action addresses a gap in a company’s disclosure, and the proposal’s alignment with industry standards.
Notably, Vanguard says its vote on say-on-climate proposals should not be interpreted as an endorsement of a company’s strategy or a vote of no confidence, but rather should be viewed as an indicator of its thinking directionally.
See our recent reports: “Vanguard Speaks on DE&I Shareholder Proposals” and here: “Vanguard Speaks on Corporate Political Activity Proposals” and “Vanguard: Director Overboarding, Board Composition Disclosure” and additional resources on our Institutional Investors page.
This post first appeared in the weekly Society Alert!