Reports and policies
Our commitment to disclosure
As a steward for the assets of more than 30 million people worldwide, we want you to know how we advocate, engage, and vote on behalf of our investors.
Reports
Policies
The investment stewardship policies below demonstrate our commitment to doing the right thing for investors. We regularly review our policies and guidelines to consider further developments in governance standards and risks to long-term shareholder value.
Responsible Investment Policy
Vanguard’s mission is to give investors the best chance for investment success. We believe responsible investment is consistent with our fiduciary duty to manage investments in the best interest of clients.
Our approach to responsible investment is outlined below.
Passive equity
Index funds have revolutionized investing by providing millions of investors with broad market exposure at a very low cost. They predominantly track benchmarks constructed without consideration of ESG criteria. Because ESG risks can undermine returns over the long run and our index funds are essentially permanent owners of the companies in which they invest, Vanguard’s Investment Stewardship team votes proxies, engages with company directors and executives, and advocates for market-wide adoption of governance best practices to address these material risks. Although we want companies to mitigate material risks, we do not dictate strategy.
Active fixed income
ESG risk is one element of Vanguard Fixed Income Group’s bottom-up financial analysis for potential investments. The team quantifies the financial materiality of ESG risk and assesses whether a security’s current valuation properly reflects that risk. Specifically, each investment is assigned an ESG risk rating based on the probability and impact of an ESG event.
Active equity
The majority of Vanguard’s active equity funds are managed by external firms. This approach provides us with diversity of thought and broader access to top talent. Each firm has its own philosophy and process, and many consider ESG factors when selecting securities.
Vanguard’s Oversight and Manager Search team is responsible for monitoring the external managers’ performance. As part of that oversight, the team reviews the external managers’ sustainability and ESG risk practices. By allowing the advisors to vote their own proxies, Vanguard enables our advisors to integrate their own analysis and direct engagement with portfolio companies into their investment strategies.
ESG products
Some investors simply don’t want exposure to ESG risks or want to avoid companies that don’t align with their values. Vanguard currently offers more than a dozen exclusionary (or negatively screened) equity and fixed income ESG products across the globe. These products use transparent exclusion measures to remove certain companies from their investment universe based on predetermined ESG screening criteria.
Principles and policies
Our four corporate governance principles serve as the foundation of our program, guiding our proxy voting and engagement activities. We apply the principles to our voting practices, considering the regional and market-specific voting policies that the funds have adopted. To learn more about how we apply the principles, view our regional voting policies below.
Notes:
All investing is subject to risk, including the possible loss of the money you invest.
ESG funds are subject to ESG investment risk, which is the chance that the stocks or bonds screened by the index provider for ESG criteria generally will underperform the market as a whole or, in the aggregate, will trail returns of other funds screened for ESG criteria. The index provider’s assessment of a company, based on the company’s level of involvement in a particular industry or the index provider’s own ESG criteria, may differ from that of other funds or of the advisor’s or an investor’s assessment of such company. As a result, the companies deemed eligible by the index provider may not reflect the beliefs and values of any particular investor and may not exhibit positive or favorable ESG characteristics. The evaluation of companies for ESG screening or integration is dependent on the timely and accurate reporting of ESG data by the companies. Successful application of the screens will depend on the index provider’s proper identification and analysis of ESG data.
