Ethical Performance
inside intelligence for responsible business


Vanguard comes up with criteria on human rights

April 2009

Vanguard, one of the largest mutual funds in the US, has developed criteria to determine whether the companies in which it invests meet human rights standards.

The policy is intended to pinpoint businesses from which Vanguard might consider divesting because they have ‘direct involvement in crimes against humanity or patterns of egregious abuses of human rights’.

Vanguard, which informed shareholders of its new stance last month, has produced the criteria after shareholder activist pressure on the 34-year-old company – and other mutual fund businesses – to adopt SRI practices. Consequently, 30 resolutions on the subject tabled for Vanguard’s annual meeting in July have been dropped.

Investors Against Genocide, a Boston-based non-governmental organization that has co-ordinated the campaign targetting mutual funds, welcomed the decision and hoped others would follow suit.

US shareholder activists began putting pressure on mutual funds over their human rights policies in early 2008. Vanguard was one of the main targets (EP10, issue 1, p2). Until then such funds had largely escaped the attention of activists, who had focused instead on the companies in whose stock mutual funds invest.

Investment companies pool individuals’ money in mutual funds, which hold almost a fifth of all publicly traded US stocks and may also invest in bonds, options, commodities or the money markets. As companies, they are subject to shareholder resolutions in the same way as the businesses whose stock they hold.

Vanguard, which has offices throughout the world, runs 150 funds in which about $1trillion (£684bn) is invested. It currently has 12,400 mainly US-based employees.

One of the first tests of Vanguard’s new policy is likely to be its stance on PetroChina, in which it owns about 150 million shares.

PetroChina has long been a target of human rights activists over its business dealings in Sudan, where human rights abuses and atrocities in the Darfur region appear to have gone largely unchecked. Vanguard has not made any public comment on when, or whether, it will review its PetroChina holdings.

Vanguard | North America | Shareholder activism

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