Vanguard, the world's largest mutual fund provider and the number two exchange-traded fund company, cares a lot about the impact from climate change and wants publicly traded companies to disclose the financial risks they face as the result of a warming planet.
Rob Main, who is part of Vanguard's investment stewardship team, told Yale Climate Connections that many companies in the materials, energy and industrial sectors face risks from climate change that will be "very relevant" to investors. That is why the mutual fund giant is urging companies to discuss those risks. "Given our duty to steward our shareholders' long-term investments, we must be aware of this risk, where it's most relevant, and ensure companies are addressing it in an appropriate manner," Main said in the interview.
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The Vanguard executive pointed to extreme weather threatening food and textile companies that rely on agriculture as one example. Meanwhile, limits on carbon pollution could hurt the profits at a fossil fuel company. Main told Yale Climate Connections that Vanguard is particularly interested in scenarios in which ignoring climate change's impact over the long haul could make a company appear more valuable than it ultimately will be. "We have a starting point of believing that well-governed companies will be better performers long term," he said in the interview.
Meanwhile, Glenn Booraem, the principal on Vanguard's investment stewardship team, recently told Reuters that Vanguard's push to get companies to disclose climate risks is an economic issue, not an ideological one. "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," Booraem said.
During the proxy season this past spring, Vanguard and other mutual fund companies, facing pressure from investors, called on energy giants like Exxon Mobil Corporation (XOM) and Occidental Petroleum Corporation (OXY) to pass resolutions on climate risk. With roughly $4 trillion under management and as the top investor for many U.S. companies, Venguard has a big voice as to what corporations focus on.
In May, Exxon Mobil's management lost a vote on a climate change resolution thanks in part to Vanguard, with more than 60% of shareholders voting that the company must report the impact of measures around the globe aimed at keeping climate change to two degrees centigrade. For the majority of the climate proxy measures this spring, however, Vanguard voted with the management at the oil and gas companies, not with the shareholders focused on climate change.