Does your Vanguard portfolio include a company that contributes to genocide?

  | 
Team Clark is adamant that we will never write content influenced by or paid for by an advertiser. To support our work, we do make money from some links to companies and deals on our site. Learn more about our guarantee here.

For many years, money expert Clark Howard has recommended the Vanguard STAR Fund to parents and grandparents who wanted to get started investing for a child or grandchild with a small amount of money.

The recommendation was ideal because a custodial account for a child can be opened with as little as $1,000.

But here’s something that may give parents and grandparents pause if they’re thinking about investing in the STAR Fund or already have investments in it…

An activist investor group says it’s one of nearly four dozen Vanguard funds that support genocide through its investments.

RELATED: The best robo-advisors of 2017

Genocide-free investing: Proposal 7 and Vanguard’s upcoming proxy vote

On November 15, Vanguard will hold a shareholder meeting and proxy vote for the first time since 2009.

A variety of business will be conducted via the meeting and vote, including the election of trustees for each fund, the approval of new arrangements with wholly owned subsidiaries of Vanguard and the like.

But perhaps the most controversial business up for consideration is Proposal 7 (aka the “Genocide-free investing” proposal), an explanation of which is tucked away on page 25 of a brochure explaining the proxy vote.

Proposal 7 is being brought forth by a group of activist investors calling themselves Investors Against Genocide (IAG), which bills itself as a “citizen-led initiative, dedicated to convincing mutual funds and other investment firms to make an ongoing commitment to genocide-free investing.”

The contention of this group is that Vanguard needs more in the way of “transparent procedures to avoid holding investments in companies that, in management’s judgment, substantially contribute to genocide or crimes against humanity, the most egregious violations of human rights.”

In a filing with the Securities and Exchange Commission, IAG notes that Vanguard held $835 million of PetroChina stock as of April 30, 2013.

PetroChina, through its controlling shareholder China National Petroleum Company, is reportedly the largest business partner of the Sudanese government. You may recall the Darfur region of Sudan was home to an infamous genocide that took place there beginning in 2003.

It is the belief of IAG, therefore, that Vanguard’s investments such as its holdings of PetroChina “helps [to] fund ongoing government sponsored genocide and crimes against humanity.”

By extension, individual investors may unknowingly be supporting genocide, the IAG claims in its controversial proposal.

As a remedy, the activist investing group wants “time-limited engagement with problem companies if management believes that their behavior can be changed.”

In other words, IAG wants Vanguard to put some mechanism in place to disclose which of their holdings might constitute socially unenlightened investing. And IAG further wants Vanguard to put such companies in a penalty box and give them a chance to clean up their act before giving them the boot out of their funds’ portfolios.

Vanguard’s response

List: These funds have been flagged as part of Proposal 7

Here’s a list of four dozen Vanguard funds in alphabetical order that are being called out by IAG:

  • 500 Index Fund
  • Capital Opportunity Fund
  • Developed Markets Index Fund
  • Dividend Appreciation Index Fund
  • Emerging Markets Stock Index Fund
  • Energy Fund
  • Equity Income Fund
  • European Stock Index Fund
  • Extended Market Index Fund
  • FTSE All-World ex-US Index Fund
  • FTSE Social Index Fund
  • GNMA Fund
  • Growth Index Fund
  • Health Care Fund
  • Inflation-Protected Securities Fund
  • Institutional Index Fund
  • Intermediate-Term Bond Index Fund
  • Intermediate-Term Treasury Fund
  • International Explorer Fund
  • International Growth Fund
  • International Value Fund
  • LifeStrategy Moderate Growth Fund
  • Long-Term Treasury Fund
  • Mid-Cap Index Fund
  • Mid-Cap Value Index Fund
  • Morgan Growth Fundâ„¢
  • Municipal Money Market Fund
  • Pacific Stock Index Fund
  • Precious Metals and Mining Fund
  • Prime Money Market Fund
  • REIT Index Fund
  • Short-Term Bond Index Fund
  • Short-Term Tax-Exempt Fund
  • Short-Term Treasury Fund
  • Small-Cap Growth Index Fund
  • Small-Cap Index Fund
  • Small-Cap Value Index Fund
  • STAR Fund®
  • Tax-Managed Small-Cap Fund
  • Total Bond Market Index Fund
  • Total International Stock Index Fund
  • Total Stock Market Index Fund
  • Value Index Fund
  • Variable Insurance Fund – Balanced Portfolio
  • Wellington Fundâ„¢
  • Windsor Fundâ„¢
  • Windsor II Fundâ„¢

What does this all mean to you?

Maybe you followed Clark’s advice and bought into the STAR Fund for a child in your life years ago. Or maybe you’re checking your 401(k) statement through work and realize you own some of the funds listed above.

We’re not going to attempt to tell you how to vote on this sensitive issue.

But vote you should — either for or against Proposal 7 and the other six proposals up for consideration if they apply to your investments.

Because the reality is that Vanguard has spent nearly $18 million to bring awareness to this vote. Board members do need to be selected and this proxy vote is how it’s being done, after all.

Yahoo Finance reports that if Vanguard cannot attain a quorum of one-third of shareholders for each fund, the company may have to spend additional funds to get the word out about another vote in the near future — until it does get that quorum.

Nobody wants those expenses to be passed on to investors in the form of higher fees.

So no matter what you believe on the issue of Proposal 7, be sure to vote!

RELATED: Know the right questions to ask of a fee-only financial advisor

Maintain a healthy retirement fund

[anvplayer video=”4116078″ station=”998267″]

This post was last modified on October 30, 2017 3:48 pm

Recent Posts

Chase Increases Sign-up Bonus for Popular Credit Cards for Limited Time

If you've been considering signing up for one of the Chase Sapphire credit cards, now…

2 days ago

6 Home Expenses You Have To Budget For (Beyond Your Mortgage)

The costs associated with owning a home go way beyond the amount on the mortgage. …

2 days ago

Should I Pay Off My Mortgage Before Retirement or Invest?

Inflation hits people on a fixed income the hardest. Say you're retired. You're living off…

2 days ago

Should I Fire My 1% Financial Advisor To Save on Fees?

Deciding to save and invest are great habits. But once you check that box, your…

3 days ago

Fubo Drops Popular Channels Amid Dispute with Warner Bros. Discovery

If you're considering subscribing to Fubo, you need to be comfortable missing out on some…

4 days ago

5 Things To Know About the Wells Fargo Signify Business Cash Card

Are you looking for a way to earn 2% back on every purchase you make…

4 days ago