The era of low-cost index funds from asset management giants such as Vanguard Group and BlackRock has simplified the fund-buying process — and that has been a good thing — but there is more work to be done.
Investors can choose funds designed as environmental, social and governance investments. But the vast majority of investors are still in funds designed to buy stocks first and deal with the social repercussions after as they cast votes at annual meetings — the most votes of any public company shareholders.
"The N-PX are not well-structured disclosures," said Jackie Cook, founder of FundVotes, which was acquired last year by Morningstar as the investment research platform pushes further into the area of ESG investing data."Votes need to be disclosed at the individual fund level, ballot by ballot, and proxy by proxy."
The late Vanguard Group founder Jack Bogle said in one of his last warnings in late 2018 that among the biggest issues the index fund giants would face in the future is their oligopoly status and societal influence. He was specifically referring to the fact that the dominant index funds vote corporate proxies on behalf of so many individual Americans, and on complex issues such as climate change.
"I'm not criticizing her [Hester Peirce] for having her view, but she has spoken her mind, just like Rob Jackson," Smith added."These dynamics within the SEC will affect whether such an idea would get air time and be considered a priority, but you have to put these things forward to get public debate."Niels Holch, a mutual fund lawyer and head of the Coalition of Mutual Fund Investors in Washington, D.C., said he has found Jackson to be thoughtful and not partisan.
Cook said Morningstar won't initially include proxy voting records as part of its influential overall fund ratings. It already offers separate sustainability ratings on funds. But its plan is to enable investors to compare asset managers against each other, as well as at the level of their individual funds.
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