In the latest evidence of the ongoing erosion of the environmental, social and governance (ESG) movement, investment titan Vanguard has doubled the amount of assets covered by a program that gives investors the power to choose a proxy-voting philosophy -- while also adding two more voting options within that program.
“Vanguard Investor Choice is grounded in the foundational belief that empowering investors to influence how their proxies are voted helps create a healthier corporate governance ecosystem,” said John Galloway, Global Head of Investment Stewardship at Vanguard. The program will now cover nearly 4 million investors and almost $250 billion in assets -- still a small slice of the more than $10 trillion in Vanguard assets under management.
Vanguard also announced that it is working with retirement plan sponsors to extend the pilot program's availability to 401(k) and other retirement plan participants. Here's the updated list of funds eligible for the program, with the three new additions in italics:
The decades-long rise of passive investing has put the Big Three indexers -- BlackRock, Vanguard and State Street --in a position of major power to steer corporate agendas. It's also put them in the crosshairs of angry investors and federal and state Republican officials who think shareholder returns should be the only consideration when voting proxies.
Giving investors the power to choose their own proxy-voting philosophy for shares held on their behalf extricates Vanguard and other firms from competing pressures applied by ESG enthusiasts and opponents. Vanguard now provides a choice of five such proxy philosophies for funds that are covered by the expanding Investor Choice pilot program:
The last two are new for the 2025 proxy-vote season. In September, Vanguard shared data on the breakdown of choices made by investors in the Investor Choice pilot using the previous set of options. Putting aside the outlier ESG US Stock ETF fund, Vanguard investors overwhelmingly favored non-ESG voting, with around 75% choosing to go with either the company board recommendation or Vanguard's judgement on the best option for shareholder returns:
Although they've shown varying degrees of dedication to ESG, BlackRock, Vanguard and State Street are routinely lumped together and subjected to blanket condemnation for promoting the philosophy to society's detriment. However, Vanguard announced earlier this year that it didn't support a single one of 400 ESG shareholder proposals during the 2024 US proxy-vote season.
In December 2022, Vanguard withdrew from the Net Zero Asset Managers Initiative, a coalition that once had 300 asset managers signed on to reduce greenhouse gases and lower the earth's temperature by 1.5 degrees Celsius by 2050. "[Vanguard is] not in the game of politics," CEO Tim Buckley told the Financial Times at the time. In mid-February of this year, JPMorgan and State Street quit the Climate Action 100+ pact, while BlackRock reduced its involvement in the initiative.