Dear asset managers,
As global, institutional asset owners, we write to request that as an asset manager, your firm offers pass-through voting on commingled funds.
For many years, asset owners have been able to vote their shares in separately managed accounts. Now, thanks to technology, this option is available in commingled and mutual funds as well. Clients are now able to direct their votes while maintaining the cost-effective structure of a commingled fund and with no disruption to their asset managers’ existing voting processes.
Leading firms in the US and Europe (such as BlackRock, State Street Global Advisors (SSGA), Vanguard, and Legal and General Investment Managers (LGIM)) have already offered options to their clients enabling them to choose how they want to vote; we now urge more asset managers to provide this flexible approach, thus ensuring capital owned by investors can be voted using policies that better align with their stated proxy-voting guidelines.
Why this is an urgent request
Asset managers own substantial percentages of listed corporations. Their decisions profoundly influence these companies' corporate governance and impact the societies in which they operate. However, global managers represent diverse investors, with different investment objectives and different time horizons. Investors need the ability to tailor their voting on issues they deem material to reaching the objectives of their investment strategy.
This has become a global issue. As one example, the recently published UK Asset Owner Stewardship Review highlights a growing misalignment between asset owners and asset managers when it comes to exercising stewardship and proxy voting at major energy companies. This misalignment is most pronounced in recent years, at American domiciled companies, and challenges the institutional asset owners’ ability to meet their fiduciary duty. Consequently, asset owners in the United Kingdom, representing more than $300 billion, have already requested pass-through voting as a mechanism to direct how their proxy votes are executed proportional to their ownership.
We believe that greater proxy voting agency will enhance corporate governance, enabling investors to align their voting and their values through shareholder democracy.
Our proposal
We ask that as an asset manager you take steps to offer investors choices amongst the following voting options:
Alignment with the asset manager’s house policy.
Alignment with the asset owner’s custom internal proxy-voting policies.
Use of thematic policies offered by third-party policy providers.
Voting on individual resolutions, filtering by company or resolution theme.
Any combination of the above.
It is important to note, that the optionality of client-directed pass-through voting is not a substitute for robust in-house stewardship efforts, including voting policies. Investors will continue to evaluate asset managers on their full range of stewardship proficiencies.
Both as clients and shareholders we have been engaging and encouraging asset managers to recognize their fiduciary duty, highlighting the economic costs of ignoring systemic issues and building the business case for responsible stewardship. We encourage you to respond positively to the requests in this letter.
Sincerely,
School Sisters of Notre Dame Collective Investment Fund
Become a signatory.
We welcome and encourage any asset owner who agrees with the sentiment of the open letter to add their institution to the list of signatories.
Each additional signatory will help accelerate conversations within the industry around stewardship and split voting.