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Exclusive: Vanguard names names and backs some calls for climate steps

[June 18, 2020] By Ross Kerber and Sinead Cruise

BOSTON/LONDON (Reuters) - Vanguard Group, the world's largest mutual fund manager, backed shareholder resolutions for shippers United Parcel Service Inc <UPS.N> and J.B. Hunt Transport Services Inc <JBHT.O> and oil driller Ovintiv Inc <OVV.N> to limit their climate-warming emissions, according to a top Vanguard executive and a company report being released on Thursday.

The details marked the first time the Pennsylvania-based firm has named names in describing such proxy votes at recent shareholder meetings.

In an interview with Reuters, Vanguard principal Glenn Booraem said the firm's views on climate and its proxy votes reflect a growing consensus among investors and companies that businesses should account for the risks of operating on a warmer planet.

Climate change "is getting increasing attention at every level of the market," he said.

Vanguard had raised climate concerns previously, without singling out companies by name or airing too much "dirty laundry," as Booraem put it last year.

But with growing interest among investors about climate impacts, the new vote details are a way for Vanguard to show executives and its own clients how the firm puts its views into practice, Booraem said.

"We are on this climate journey and will continue to evolve, over time, at our own pace," he said.

As a top shareholder in nearly every major U.S. company, Vanguard’s voice is often dominant in boardroom decisions. Vanguard manages some $6 trillion under management for 30 million mom-and-pop investors.

Traditionally Vanguard and its main rival, BlackRock Inc <BLK.N>, have backed shareholder climate resolutions only about 10% of the time. Critics, including Vanguard's late founder, John Bogle, have long called for more transparency on how the asset managers vote.

Booraem declined to say what Vanguard's overall support rate will be for climate measures this year, which will make up a tiny slice of the votes it will cast at roughly 13,000 companies worldwide during the 12 months ended June 30.

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He declined to comment whether Vanguard would follow BlackRock in joining the Climate Action 100+ investor group seeking emissions cuts.

But Booraem said a report scheduled to be posted Thursday on Vanguard's website includes specific examples that are meant to be representative of the company's thinking on climate change. It aims to take a fiduciary approach and not an ideological one, he said, especially given the wide range of views among its clients.

The report shows that among nine shareholder resolutions voted on since April, Vanguard sided with management five times. For instance Vanguard voted against a proposal to have JPMorgan Chase & Co <JPM.N> report how it would use its lending to cut emissions, saying the bank has already taken adequate steps.

In four other examples Vanguard sided with shareholders sponsoring the resolutions. One was a call for UPS <UPS.N> to report on plans to reduce its climate-warming carbon emissions, saying UPS had failed to disclose how it would cut airplane fuel usage.

Vanguard also voted in favor of a proposal to have Ovintiv <OVV.N> set emission-reduction targets, saying they would help investors understand the company's strategy.

Vanguard's votes did not determine the outcomes of the two questions. Public securities filings show at UPS 30% of votes cast favored the measure, a figure that would include Vanguard's roughly 8% holding of Class B shares.

At Ovintiv 56% of votes favored the measure; Vanguard owns less than 1% of shares outstanding.

Representatives for UPS and Ovintiv declined to comment.

Vanguard did determine the outcome at J.B. Hunt <JBHT.O>, where it holds about 10% of shares. A measure calling for the trucker's plans to cut emissions -- similar to what was asked of UPS -- won support from 54% of votes cast, filings show.

A J.B. Hunt representative did not respond to requests for comment.

(Reporting by Ross Kerber in Boston and by Sinead Cruise in London; Editing by Katy Daigle and Leslie Adler)

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