Author: Tumelo – www.tumelo.com
Discover the latest developments in US stewardship – new discussion paper on pass-through voting published by Tumelo
At the beginning of March 2024, Tumelo had the honour of hosting a private roundtable discussion in Washington with some of the United States’ leading experts on stewardship, including representatives from Franklin Templeton, Vanguard, AFL-CIO, Seattle City ERS, SBA of Florida, San Francisco ERS, American Century Investments, LGIMA and more.
In the event, these experts shared their insights on pass-through voting, including:
- Pass-through voting’s impact on engagement.
- Key challenges to pass-through voting.
- The future outlook for pass-through voting.
- Shareholder democracy and its implications.
Our team has distilled the valuable participant-insights into a comprehensive discussion paper: “Pass-through voting in the US: Insights from the experts”.
Some highlights include:
John Galloway, Principle, Global Head of Investment Stewardship at Vanguard: “I share the vision with others in this room, for a market-based solution to proxy voting, where you can empower individuals to have a say. I think it’s really interesting.”
Leola Ross, Deputy CIO and Head of ESG at Seattle City Employees’ Retirement System: “The right to vote is important. The number one reason for owning shares is you’re meant to have the authority to have your say — that is the whole point of a listed company. That is the fundamental right of a shareholder.”
Piers Hugh Smith, Head of Stewardship at Franklin Templeton: “The implications for shareholder democracy are very positive, and the potential for enhancing market diversity and overall health is promising.”
We invite you to download and read our discussion paper today, to stay at the forefront of these global industry developments.
Why does pass-through voting matter?
Since regulation has forced better vote reporting, institutional asset owners have noticed inconsistent voting patterns across their portfolios.
This inconsistency includes their asset managers voting in misalignment with their stated investment principles, or their assets being cancelled out by asset managers voting in opposition to each other. Typically the range of misalignment is 30%, which causes potential issues for the asset owner’s fulfilment of their fiduciary duty.
Why does this matter for asset managers?
In this landscape, asset managers can no longer satisfy such a broad range of clients who have diverging views on voting, especially given the current debates around ESG issues.
At the same time, regulation aimed at reducing the concentration of voting power amongst the largest asset managers has led at least four global asset managers to embrace greater voting choice for clients, impacting the competitive landscape.
Using pass-through voting, asset managers can meet their clients’ diverse stewardship aims by offering a product with the cost and liquidity benefits of a pooled fund, as well as the ability to vote their shares on a pro-rata basis.
You can download Tumelo’s white paper here to learn more about the market developments, legal implications, and various benefits of pass-through voting.
