It's official: index fund giant Vanguard Group voted against Exxon Mobil management for the first time to require the oil and gas giant to report on climate change, according to proxy voting records published by Vanguard on Thursday.
The Exxon Mobil shareholder measure passed at the company's annual meeting earlier this year, a victory shareholder advocates said could not have happened without the vote of Vanguard, though the fund company had refused to reveal its specific company votes before Thursday's official disclosure.
Vanguard also voted against management at Occidental Petroleum over a similar climate measure — also expected based on the results from the Occidental Petroleum shareholder meeting earlier this year. But Vanguard did vote with oil and gas management and against shareholder climate proposals in a majority of 2017 proxy measures.
The two votes against Exxon and Occidental management contrast with Vanguard's votes against shareholders putting forward climate proposals at Noble Energy, Marathon Petroleum, Devon Energy, Chevon and Kinder Morgan.
Vanguard also voted against requiring Warren Buffett's Berkshire Hathaway to report on climate and divest from fossil fuel holdings.
A Vanguard spokeswoman said its decisions have more to do with how the shareholder proposals are worded and not the fund company's commitment to climate policy among its holdings. "While we believe the issue is real, we may not believe the proposal meets our threshold for support."
Vanguard, the world's largest index mutual fund manager with $4 trillion under management, has not been known for its shareholder activism, but its influence as an investor is large and growing. The fund giant took in more than $300 billion in 2016, while the rest of the mutual fund industry combined had investor redemptions. "With Exxon and to a lesser extent Occidental, these votes can also be seen as bellwethers for the entire industry that major investors are expecting action on climate risk disclosure," said Jon Hale, the director of sustainability research at Morningstar.
BlackRock and State Street Global Advisors, two other investing giants with large exchange-traded fund businesses, have received higher marks in past years from shareholder advocates for commitment to social and environmental issues. Both voted the same way as Vanguard on Exxon and Occidental.
Hale noted that State Street was the strongest voice among the investing giants, voting in favor of six of the seven shareholder climate change measures among S&P 500 energy companies, with the exception of Noble Energy. He said most seemed to be similar in scope.
"What seems to be going on with Vanguard is that they are giving companies time to make progress towards improving their climate disclosures, but in the cases of Exxon and Occidental, they felt they had already done so and not seen the progress they were expecting. That leads me to believe that these other companies will either have to show improvement this year or we should expect Vanguard to vote for the resolution next year."
He also noted that State Street has been active on this issue for a lot longer than Vanguard.
"Funds are not immune from the attraction of taking action at a few high-profile companies to put down a marker that companies need to be more transparent about climate risks, in general," said Heidi Welsh, founding executive director of the Sustainable Investments Institute.