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Vanguard's voice on societal risks

April 20, 2018

The last few months have focused public attention on difficult issues: tragic gun violence in schools, the heartbreaking opioid crisis, and ongoing environmental concerns, among other challenging topics that elicit strong emotions and a desire for action.

As an organization of nearly 17,000 community members who care about these issues, and as a leading investment manager, Vanguard is constantly thinking about the role we play and how we can best respond.

We believe that the correct response is compassion. We are deeply saddened by the recent tragedy at the Marjory Stoneman Douglas High School in Parkland, Florida, and urge policymakers to take appropriate action to protect Americans from gun violence. We also believe in the need to remain unwavering in our mission as an investment provider to serve our clients by focusing on their long-term needs and financial security.

Vanguard's role as an investor

Vanguard's role as mutual fund manager is to steward the assets of some 20 million people who have a wide range of personal beliefs. The one thing those 20 million clients have in common is that they've asked us to protect their money and help it to grow—for retirement, for a first home, for a child's education.

One of the most important ways we do this is by advocating for and protecting their financial interests in boardrooms around the world. We regularly meet with company leaders to learn more about a company's strategy, risk oversight, and long-term goals.

We have a responsibility to understand how business activities that pose a risk to society may also pose a risk to the long-term value of our funds. We seek assurance that boards oversee and own these risks, and that they take appropriate measures to mitigate them.

Following the attack in Parkland, Vanguard arranged meetings with the leaders of public companies that manufacture and sell guns to civilians. We asked questions and sought to understand how the companies plan to help prevent similar tragedies from happening again.

We've also been meeting with leaders in the pharmaceutical industry to further understand what measures boards are taking to oversee and reduce the risks of opioid drug distribution. And conversations about climate risk are a regular and ongoing part of our engagements with companies in carbon-intensive industries.

This is nothing new for Vanguard, though some people may be surprised to hear that we regularly talk with company leaders about an array of governance, environmental, and social risks. Last year alone, we had nearly one thousand engagements with company leaders on such governance matters. Many of these issues are stories that you've read in the news. Yet we do not disclose our direct involvement in these matters, the names of the companies, or the specific contents of our conversations. Keeping these discussions private enables both Vanguard and the company to engage with a greater level of candor, directness, and productivity. This approach drives change and helps to ensure the effectiveness of our future discussions.

A keen focus on the long term

Keep in mind that Vanguard index funds will hold a stock for as long as it's in the index. We need to know that companies are built and run to be sustainable businesses. We are not engaging with these firms to further a political or social agenda, but rather, we engage to uphold our responsibilities as fiduciaries and protect the value of our shareholders' investments.

For us, every question around environmental, social, or governance matters comes down to: "How does this affect the long-term value for our fund investors?" That orientation provides clarity for us, and we believe it makes our positions less confusing for all stakeholders. We also know that over the long term, the interests of fund shareholders and the broader stakeholder community often converge.

As we have done for 43 years, Vanguard will continue to do our part. We will hold company boards and leaders accountable. We will advocate for the shared interests of society and long-term investors. And we will speak with our voice and our proxy votes to protect the interests of the millions of Americans who entrust us with their financial futures.