Policy change

Shareholder resolutions calling for the adoption of a “genocide-free” investing policy at Vanguard might be withdrawn before the firm's July 2 shareholders’ meeting because it has established a formal policy.

The board of trustees of The Vanguard Group Inc., Malvern, Pa., now requires “regular reporting on portfolio companies whose direct involvement in crimes against humanity or patterns of egregious abuses of human rights would warrant engagement or potential divestment,” the firm said in a statement.

The board decided to formalize the process and has directed Vanguard to develop and implement screening and reporting procedures to cover all of its 157 funds, said Linda Wolohan, spokeswoman at Vanguard. The practice has been in place on an ad hoc basis across the firm.

The shareholder proposals called for Vanguard to adopt a genocide-free investing policy and targeted 30 mutual funds that the firm managed.

The resolutions are part of a larger effort coordinated by activist group Investors Against Genocide to use the shareholder proxy voting process to encourage fund boards to divest from companies that contribute to genocide or crimes against humanity.

“This action by the board of trustees at Vanguard is a clear affirmation that fiduciary responsibility and ethical responsibility are not mutually exclusive,” Eric Cohen, chairman of Investors Against Genocide of Boston, said in a statement.

The organization plans to hold discussions with Vanguard in the next month to decide whether the shareholder proposals will be withdrawn from the proxy statement, the organization said in the release.

Because the Vanguard policy applies to all of its funds, it demonstrates the feasibility of divesting not only from actively managed funds but from funds that track an index, the organization stated.

In recent years, the group has targeted dozens of funds at fund companies that have purchased stocks in companies that support or do business with countries committing human-rights abuses, such as the genocide in the Darfur region of Sudan.

In proxy documents filed with the Securities and Exchange Commission this week, the firm responded to the shareholder proposal and recommended that shareholders vote against them because “it calls for procedures that duplicate existing practices and procedures of the Vanguard funds.”

Sue Asci is a reporter at InvestmentNews, a sister publication of Pensions & Investments