Vanguard Resumes Stewardship Meetings After Reviewing SEC Guidance

Vanguard, the world's largest asset manager with over $10 trillion in assets under management, has resumed its stewardship meetings with companies after a temporary pause to review the new guidance issued by the Securities and Exchange Commission (SEC) on investor activism and engagement with portfolio companies. The SEC's guidance, issued on February 11, 2025, threw asset managers into confusion, with some of the industry's largest firms, including BlackRock and Vanguard, putting a temporary halt to meetings.

The SEC's new guidance requires investment firms that "pressure" companies over environmental, social, or governance (ESG) matters to file the more extensive Schedule 13D, typically required of activist investors. This change has led asset managers to reassess their engagement strategies to ensure compliance with the new requirements.



Vanguard, which paused its engagement following the SEC's guidance, is now analyzing the new requirements to determine if any modifications to its passive approach to investment stewardship activities are warranted. The firm's investment stewardship team prioritizes transparency with investors, policymakers, and portfolio companies, and continues to work constructively with policymakers to address questions related to passive investing and proxy voting.

The new guidance may impact Vanguard's ability to influence companies on ESG-related matters, as engaging in activities considered "pressure" on management could require the firm to file the more costly and time-consuming Schedule 13D. This could potentially limit Vanguard's ability to engage with companies on ESG topics, as filing Schedule 13D may be seen as a more aggressive stance that could lead to increased scrutiny and potential backlash from companies.

For investors focused on sustainability and responsible investing, the new guidance could have several implications. While it could lead to a reduction in ESG engagement activities by asset managers, it could also increase transparency and accountability. By requiring them to file Schedule 13D, investors and other stakeholders would have more information about the extent and nature of these engagements, potentially leading to better alignment between investors' ESG goals and companies' practices.

In conclusion, the new SEC guidance may impact Vanguard's ability to influence companies on ESG-related matters, with potential implications for investors focused on sustainability and responsible investing. While the guidance could lead to a reduction in engagement activities, it could also increase transparency and accountability. The ultimate impact on investment performance remains uncertain and would depend on various factors, such as the specific engagement strategies employed by asset managers and the response of companies to these engagements.