Vanguard Group Inc. is shifting some of its proxy voting power to its 25 subadvisers, which collectively manage more than $471 billion in equity assets for the Malvern, Pa.-based firm.
Responsible investing experts are waiting to see how the new arrangement will play out between $5.2 trillion Vanguard and its external managers, including whether Vanguard will improve its own voting record on climate change and sustainability issues.
The decision, announced on April 26, marks a move away from Vanguard's previous protocol, in which all proxy voting for its funds was administered centrally by its investment stewardship team. By the end of 2019, Vanguard expects to complete the transition of proxy voting responsibilities for its externally managed funds.
"This decision is part of a much broader message around our evolving approach to investment stewardship," said Glenn Booraem, a principal and investment stewardship officer at Vanguard.
The move helps "ensure that the companies in which we invest, or (external managers) invest through our funds, are governed well and governed in alignment with their long-term strategy to create value for our end investors," Mr. Booraem continued.
In migrating voting power to its subadvisers, Vanguard seeks to better integrate the investment management process for each fund with the proxy voting and engagement work subadvisers already do with portfolio companies, he explained.
With the transition, Vanguard's largest subadviser by assets, Wellington Management Co., Boston, will be granted the greatest share of voting power, Mr. Booraem confirmed. Wellington manages about $230 billion in equity assets across Vanguard's funds, the company confirmed.
Vanguard is passing proxy voting duties to external managers of its funds, but, across the industry, asset managers take varied approaches to the voting process, according to Morningstar Inc., Chicago.
"There are a number of ways in which proxy votes can be divided or decentralized within (fund) complexes," said Toronto-based Jackie Cook, director, stewardship research at Morningstar.
Some fund managers have a system in which individual portfolio managers can debate major issues impacting companies in which they hold shares, "and you don't have one governance committee that hands down the vote," Ms. Cook said, adding that the process can range from "completely centralized on one hand or decentralized on the other."