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25 August 2017

US investment management company Vanguard urges for disclosure of climate change risks

Earlier this August, Pennsylvania-based investment management company, Vanguard, officially announced its stance towards climate risks, urging companies to disclose how investment and asset management companies will be affected from climate change.

During the last proxy season, Vanguard and other fund companies have pushed to pass several high-profile shareholder resolutions on climate risks at big energy companies like Exxon Mobil Corp and Occidental Petroleum Corp.

Despite having a different stance in the past, Vanguard has made significant progress regarding  its support on climate activists and similar sustainability measures.

In an interview with Reuters Glenn Booraem, Vanguard’s Investment Stewardship Officer, said that “the issue, as well as the shareholder proposals have evolved”.

"Our support for these proposals is not a matter of ideology, it's a matter of economics," he said.

During the proxy season earlier this year, Vanguard voted for resolutions tied to climate risks, but so far few details have been revealed on its actual plan.

Booraem 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 is also planning on addressing other social issues too, such as gender diversity on corporate boards.

The company accepts the fact that the views of its twenty million investors on governance on environmental and diversity issues run “along the entire spectrum, that’s why we want to approach it from an economic perspective”.

However, Booraem seems positive about the outcome of this new approach, as he claims that the company executives are generally more forthcoming about these subjects that once received little corporate attention.

"Companies are increasingly receptive to the outreach", he said.

Vanguard’s stance for more disclosure of climate risks was noticed by Boston-based  traditionally activist fund firm Walden Asset Management.

Tim Smith, Walden’s Director of Shareholder Engagement said that Walden is “pleased with the changes”, but Vanguard has not gotten far enough underlying that his company will continue to press fund managers on climate change and other issues.

Vanguard’s announcement is expected to send a signal to more financial service companies, that the discourse on climate change risks is no longer a business distraction led exclusively by “activist investors”. 

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