Exchange-traded funds are hailing the move as the democratization of investment management, but some observers worry it could be polarizing
Investors in the world’s largest exchange-traded funds are gaining the power to vote as shareholders at companies within those portfolios – a development that could ratchet up discord over environmental, social and governance issues.and individuals who buy into so-called passive funds have traditionally left proxy voting on issues such as executive pay, climate action and director nominations up to portfolio managers, who mark their ballots according to the fund’s objectives.
It’s unlikely many smaller institutional investors, and especially individuals, have the time or expertise to comb through the sheer volume of proxy circulars from companies within a fund, and that could lead to voting based on principles apart from good corporate governance. That means reacting to short-term declines in stock prices or social media campaigns by vested interests, including the “anti-wokeness” forces, Mr. Robertson said.
The fund manager did not respond to a request for comment, but CEO Larry Fink has said pass-through proxy voting addresses a demand among some investors for direct participation. “That’s partly being driven by the public debate around issues that can impact the value of companies and how different asset owners choose to navigate them,” he wrote in a post on BlackRock’s website.
More troubling, investors with little or no experience could end up as targets for disinformation from groups with agendas, such as attacking ESG. The anti-ESG movement is playing out in many Republican-controlled U.S. states, which have pledged to boycott fund managers that consider metrics such as emission-reduction plans in their investment decisions. Mr.
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