Exclusive-Vanguard pauses corporate meetings over new ESG guidance

By Ross Kerber

(Reuters) -Top mutual fund manager Vanguard has paused meetings with portfolio companies while it reviews the impact of new guidance on investor activism from the U.S. Securities and Exchange Commission, according to people familiar with the matter.

In a recent notice, the SEC, the acting chair of which was appointed by President Donald Trump, revised its "beneficial ownership reporting" interpretations in ways that could put new burdens on firms like Vanguard that now rely on the SEC's Schedule 13G form to report major holdings.

Going forward, the SEC said managers may need to use the more complex Schedule 13D, which would increase their costs, if they pressure management on matters like climate questions or whether a company has a staggered board or poison pill takeover defenses.

Vanguard put the pause in place because it is "trying to process and understand the new guidelines so they can remain a 13G filer and not a 13D filer," said one of the sources, speaking on condition of anonymity.

Vanguard did not comment on the meetings. In a statement sent by a representative on Wednesday, the Pennsylvania-based firm said "We are analyzing the new guidance from SEC staff to determine what, if any, modifications to the Vanguard funds' passive approach to investment stewardship activities may be warranted."

The company said it prioritizes transparency and that "we continue our commitment to working constructively with policymakers to address questions related to passive investing and proxy voting."

Ending the meetings could reduce the power of shareholder activists focused on environmental, social or governance questions, corporate attorneys say, the apparent goal of the SEC's current leadership. But it could also diminish the input that executives receive from top investors on more traditional corporate questions like executive pay.

Rival asset manager BlackRock had also paused meetings with some of its portfolio companies. A company representative did not immediately comment on the status of these meetings on Tuesday.

(Reporting by Ross Kerber; Editing by Leslie Adler, Kirsten Donovan)

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