Pass-Through Voting Gains Traction as Banks Navigate ESG Backlash and Regulatory Scrutiny

Stewardship Reimagined: How Pass-Through Voting is Reshaping Bank-Client Dynamics

In the high-stakes world of investment stewardship, a quiet revolution is underway. As regulatory pressures mount and the debate around environmental, social, and governance (ESG) criteria grows more polarized, the fundamental mechanism of shareholder democracy—the vote—is being re-examined. For banks and wealth managers, this isn't just a theoretical exercise; it's a pressing commercial and fiduciary imperative.

For years, the stewardship playbook relied on engaging the giant passive asset managers—the Vanguards and BlackRocks of the world—to leverage their massive voting blocs for long-term value. However, that model is showing cracks. Burdened by intense regulatory oversight, particularly in the U.S. concerning Schedule 13D filings, many passive managers have adopted broadly "board-aligned" voting policies. This often means sidestepping support for shareholder proposals on contentious climate or social issues, potentially prioritizing short-term corporate harmony over long-term resilience.

"The era of trusting the biggest players to vote in everyone's best interest is fading," observes a London-based governance analyst. "Investors, especially sophisticated private clients, are demanding precision, not proxy."

Enter pass-through voting. This mechanism allows investors, including banks managing client assets, to direct how fund managers vote the underlying shares in pooled investment vehicles. It's a tool that tightens fiduciary alignment, enhances transparency, and ensures a client's values are reflected across their entire portfolio, not just in directly held stocks. The market is taking note: Vanguard recently reported client participation in its pass-through program is approaching 10%, representing a staggering $1 trillion in eligible assets.

The urgency for such tools is amplified by a parallel trend: the sharp rise in corporate "no-action" requests to the U.S. Securities and Exchange Commission (SEC). These requests allow companies to seek permission to exclude shareholder resolutions from ballots. In the 2025 proxy season, such requests jumped 35%, with the SEC granting relief on nearly two-thirds of challenged proposals, especially those related to ESG. This creates a concerning asymmetry—just as investors seek more voice on long-term risks, companies are finding more ways to keep those debates off the table.

LGT Wealth Management, the first European wealth manager to adopt pass-through voting, illustrates the shift. "Our clients choose us for a high-conviction, long-term approach," says Siobhan Archer, Global Stewardship Lead at LGT. "It became inconsistent to vote actively on our direct equity holdings while outsourcing voting decisions on fund holdings in the same companies. Pass-through voting unifies our voice."

The impact is tangible. In the first half of 2025, LGT's program enabled votes at over 800 companies—600 more than its direct holdings would allow—covering 11,000 proposals. In 17.5% of cases, LGT's vote diverged from the fund manager's recommendation, often taking a firmer stance on climate accountability or board diversity.

This trend underscores a broader expectation: private clients now demand institutional-grade stewardship across all assets. Banks, with their deep client relationships and research capabilities, are uniquely positioned to meet this demand. In a market increasingly dominated by low-cost passive products, robust voting frameworks and clear reporting become key differentiators. Pass-through voting ensures that the scale and efficiency of passive investing don't come at the cost of fiduciary responsibility or client alignment.

Voices from the Market:

"This is a watershed moment for fiduciary duty. Pass-through voting finally gives asset owners a real say, rather than a diluted voice filtered through a manager's one-size-fits-all policy. It's about accountability."
— Michael Thorne, Portfolio Manager at Horizon Trust (New York)

"It's another layer of complexity and cost masquerading as empowerment. Most clients care about returns, not proxy advisor reports. This feels like stewardship theatre for the ESG crowd."
— Dr. Rebecca Shaw, Chief Investment Officer, Shaw Capital Partners (London) - [More Emotional/Sharp Commentary]

"The data from LGT is compelling. When you can vote on hundreds more companies and regularly diverge from manager recommendations, you're adding tangible value. This is where advisory services are headed."
— Anya Petrova, Head of Sustainable Investing, Nordea Wealth Management (Stockholm)

"The surge in SEC no-action requests is the real story here. It shows companies are on the defensive. Tools like pass-through voting are the necessary counterbalance to keep shareholder democracy functional."
— David Chen, Legal Counsel specializing in SEC regulations (Washington D.C.)

Ultimately, for forward-looking banks, integrating mechanisms like pass-through voting is more than a compliance exercise. In a competitive landscape, it's where consistent, transparent, and client-aligned stewardship becomes a visible commercial edge.

This analysis is based on original reporting and commentary from Private Banker International.

The information contained herein is for general informational purposes only. It is not intended as professional advice, and reliance on its contents is at your own risk. Always seek specialist advice before making investment decisions.