A group of Republican U.S. state treasurers has announced plans to withhold votes for Vanguard fund board nominees, criticising the selection as “tone-deaf” on sustainability issues. The move presents a political challenge for the $10.1 trillion asset manager ahead of a rare fund trustee election on Wednesday.
While the officials oversee only a small fraction of Vanguard’s total assets and are unlikely to influence the final vote outcome, their opposition highlights the growing political pressures on asset managers. The industry has faced increasing scrutiny from Republican lawmakers, even as firms scale back on environmental, social, and governance (ESG) priorities.
In a 24 February letter to Vanguard, eight state finance officials, led by Missouri Treasurer Vivek Malek, accused the firm of ignoring regulatory and legislative pushback on ESG.
Malek singled out Sarah Bloom Raskin, a director since 2018, whose climate risk advocacy previously derailed her nomination for a top Federal Reserve role. He also pointed to David Thomas, a director since 2021 and president of Morehouse College, criticising his strong support for diversity, equity, and inclusion (DEI) initiatives.
Malek argued that, despite Vanguard’s recent policy reversals, including rolling back diversity guidance and exiting a net-zero climate initiative, the board remains ideologically unbalanced.
“To me, it seems like Vanguard’s leadership should be moving in a different direction,” he said.
Other signatories include Texas Comptroller Glenn Hegar, who oversees $1.86 billion with Vanguard, and Pennsylvania Treasurer Stacy Garrity, with $6.2 billion invested. Malek himself oversees $4.5 billion in educational savings, 90% of which is managed by Vanguard.
Vanguard has not responded to requests for comment. However, a securities filing on 19 February indicated the firm was still seeking participation in the vote, urging clients to cast ballots to meet quorum and avoid additional costs.
“Every vote matters,” Vanguard stated, highlighting the logistical challenges of securing votes across 35 fund trusts, each requiring at least one-third of its net assets to participate.
The dispute reflects a broader ESG backlash facing investment firms, with asset managers navigating an increasingly polarised landscape. Jeff DeMaso, editor of a newsletter for Vanguard investors, noted that firms are now struggling to define clear rules around ESG engagement.
“There’s an element right now of trying to figure out what the rules are,” he said.
With Vanguard caught in the crossfire of political and regulatory debates, the upcoming vote underscores the complexities of balancing fiduciary duty with sustainability considerations in the current investment climate.
