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SEC Proxy Disclosure Proposal Could Boost ESG Clarity, but Some Have Concerns

Fund Directions

A proposed rule change designed to help ESG investors track fund proxy votes on key questions may encounter resistance among fund complexes concerned about unnecessary costs and shareholder misperceptions.

The change proposed by the SEC in September would enhance fund proxy voting disclosures to help fund shareholders see how completely fund managers fulfill their promises on ESG by forcing managers to publish clear, searchable records showing how they voted on ESG issues at each company in the fund portfolio.

“The purpose of this proposal is to allow more transparency for shareholders to see exactly how their fund groups are voting on very specific issues,” said Stacy Louizos, a partner at Blank Rome. “It’s only going to bring more attention to how your funds are voting, for both shareholders but also boards.”


“These documents can be, depending on the fund, very, very long,” Louizos said. “Right now it’s not an easy read.”


Some worry that by requiring funds to disclose when they don’t recall shares for a vote, the provision would unfairly stigmatize a decision to not recall in investors’ minds.

“Will it be considered a negative if they’re showing in a report that they didn’t recall for securities that were out on loan?” Louizos said. “Then it could potentially impact portfolio management with respect to securities used for securities lending.”

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“SEC Proxy Disclosure Proposal Could Boost ESG Clarity, but Some Have Concerns,” by Ben Sheng, was published in Fund Directions on November 23, 2021.