Vanguard funds supported only 2% of shareholder resolutions on environmental and social issues at its U.S. portfolio companies in its 2023 proxy year, down from 12% in the prior proxy year.

The proxy year lasts from July 1 through June 30, according to a brief published by Vanguard’s investment stewardship team on Monday.

Specifically, Vanguard said that in proxy year 2023 the firm saw 359 environmental and social proposals put forward for a vote at its U.S. portfolio companies, up from 290 in the 2022 proxy year.

Vanguard attributed the decline in support for such proposals largely to the “volume and nature of the shareholder proposals, driven, in part, by November 2021 changes to SEC guidance, and improvements in company disclosure.”

Vanguard also observed that in recent years many U.S. public companies increased their disclosures related to certain material risks, including material environmental and social risks, in response to shareholder interest. “As a result, many shareholder proposals submitted during the 2023 proxy year went beyond requests for disclosure and instead sought specific actions from companies, including changes in company strategy or operations,” the money manager stated in the brief.

“In some cases, we identified that although a proposal raised a material risk at the company in question, the board had already demonstrated appropriate oversight of the risk and evidenced its oversight through robust disclosure or had practices in place that substantially fulfilled the proposal’s request. In those cases, the funds did not support the proposals, because boards demonstrated that the risks were overseen and disclosed to the market.”

Vanguard also said that during the 2023 proxy year the number of shareholder proposals related to environmental matters jumped by 50% to 150 from 100 in the prior year.

Companies in the finance and energy sectors received the highest number of such environmental proposals, 33 and 24, respectively. The most common subject of those proposals was target-setting for greenhouse gas emissions. Other common proposal topics focused on climate lobbying and fossil fuel financing.

“On behalf of the funds, we evaluated the proposals case by case, assessing each on its merits and in the context of the facts and circumstances of the company in question,” Vanguard noted. “Across all sectors in the U.S., we saw companies receive shareholder proposals addressing social topics such as racial equity, reproductive rights, and pay gaps.”

The consumer sector received the largest proportion of social proposals (99 of the 274 social proposals on which the funds voted), with several proposals in the sector concerning unionization and worker safety.

“We engaged with company leaders and directors to better understand how boards thought about these risks,” Vanguard said. “For these proposals, too, we evaluated each one case by case on its merits and in the context of the specific company.”

Vanguard added that despite changes in voting results, which are driven largely by the volume and substance of the proposals presented, its approach to evaluating shareholder proposals — including those on environmental and social matters — has been consistent over time.

“Our focus remains on identifying proposals that address financially material risks at a given company, supporting proposals that may fill gaps in the company’s current practices (while not intruding on company strategy and operations) and providing sufficient latitude to the company on implementation,” the firm added.

Vanguard has about $8.2 trillion in assets under management.

Vanguard S.O.S., an international campaign group that seeks to push Vanguard towards sustainable and responsible investing, criticized both Vanguard and BlackRock over their commitment to ESG issues.

“Vanguard and BlackRock both acknowledge the risks that climate crisis poses to the financial system and to investors, yet they continue to do almost nothing to mitigate that risk,” said Roberta Giordano, campaign manager for Vanguard S.O.S., in a statement issued on Tuesday.

“Last year’s numbers were bad, but 2% is shocking. Looking at Vanguard’s behavior as a whole, including its decision to leave NZAM (the Net Zero Asset Managers initiative), we have to question the company’s commitment to safeguarding clients’ investments from evident risk,” she said.

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