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Sustainability Matters

Big (Passive) Voices on Gender Diversity and Climate Risk

The stewardship efforts of BlackRock, State Street, and Vanguard are having widespread impact.

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The rise of passive investing would seem to pose a problem for stewardship--the actions that asset managers take as shareholders to improve the companies they own through direct engagement and proxy voting on management and shareholder proposals.

If you are a permanent owner of every company, what incentive do you have to engage with the companies you own as a shareholder? You are not going to sell the stock, in any event, so why bear the costs of researching thousands of companies and engaging with enough of them for it to make a difference in the performance of your portfolio, especially when any performance benefit you receive would be shared with your passive competitors, who own the same companies? 

Jon Hale does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.