Proxy-voting records: Where the rubber meets the road

August 23, 2019 — In this Q&A, the Eaton Vance floating-rate loan team offers its perspective on today’s loan market.

By: Craig P. Russ; Andrew Sveen, CFA; Ralph Hinckley, CFA; Christopher Remington

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By Shirley PeoplesAVP & Shareholder Engagement Assistant Manager, Calvert Research and Management

Washington - Corporate shareholders, as owners of public companies, are involved in decisions on important matters concerning companies' policies, practices and governance. Shareholders make their views on these matters known through their votes on corporate proxy statements. Calvert believes that proxy voting is one of the most direct ways investors can influence companies and industries to move toward more responsible environmental, social and governance (ESG) practices.

Values and votes

An investment firm's proxy-voting record can be a telling indicator of its commitment to engage companies on critical ESG issues. When considering which firms truly emphasize Responsible Investing principles in its interactions with corporations, actions speak louder than words

In 2017, a Barron's article, "Fund Sustainability Ratings Tell Half the Story," highlighted this point. It looked at the 2017 proxy-voting record of funds that scored well on Morningstar's sustainability ratings and found that many largely voted in line with management - and against proposals for increased climate-risk disclosure, increased board diversity and reporting on gender pay gaps.1.

A March 2019 Ignites article, based on a new Morningstar report, echoed these observations, noting that several large investment firms, including Black Rock, Vanguard and Fidelity, cast their ESG fund proxy ballots against various climate proposals. Specifically, the funds "voted against shareholder resolutions that called on energy companies to reduce emissions or disclose their sustainability efforts."2 While there may be valid reasons for voting against a specific ESG proposal, such as unnecessarily onerous reporting requirements if a company already reports significant metrics, investors need to keep a watchful eye on whether their ESG funds are voting according to their sustainability objectives.

Calvert's proxy-voting record

Our proxy-voting guidelines, available on our website, outline our approach to voting on critical issues facing corporations, including many governance considerations. Calvert's proxy- voting guidelines support governance structures and policies that keep the focus of company management on long-term corporate health and sustainable financial, social and environmental performance.

Over this past proxy season, which ran July 1, 2017 to June 30, 2018, Calvert voted at 4,425 meetings. We also believe in the importance of disclosure and transparency. As a result, our votes are posted to the proxy voting section of our website within 72 hours of being cast and, in almost all cases, in advance of the meeting so our clients and the general public can easily see how we voted.

Environmental issues front and center

Environmental issues have long been a focus of Calvert's corporate engagement agenda. Calvert has engaged with companies in areas like climate change, greenhouse gas emissions, water conservation and development of renewable energy sources, among others.

In the most recent 2018 proxy season, on proposals related to climate change, Calvert voted for the proposal 100% of the time. Each was contrary to management's recommendation. A vote not aligned with management is significant since corporations typically seek to maintain the operational status-quo.

Bottom line: We believe proxy voting is an indispensable shareholder tool and responsibility, and is one of the most effective ways to move companies and industries toward more responsible ESG practices. Calvert votes according to our comprehensive proxy-voting guidelines, not just in-line with company management.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.