SEC Acting Chair Allison Herren Lee described changes to the proxy voting disclosure framework necessary to keep pace with the "transformation" of investor preferences.

In remarks at the 2021 Investment Company Institute Mutual Funds and Investment Management Conference, Ms. Lee asserted that developing a system in which funds' voting records as to environmental, social and governance ("ESG") concerns are disclosed is important, given the demand for investment opportunities involving ESG-oriented investment vehicles. She also noted that index-oriented funds often lend out their securities, thus potentially losing their right to vote those securities. She indicated that such funds should potentially vote their securities in support of ESG matters even if forgoing the income from securities lending, as such votes were potentially a better way of "maximizing value" for investors.

Ms. Lee also advocated for the SEC to require funds to disclose to investors, on Form N-PX - the way in which the investors voted on ESG-related shareholder proposals. She said the SEC should sort and collate information as to how various funds voted and provide this information to investors.

Commentary Steven Lofchie

Acting Chair Lee's remarks strongly suggest that she favors not only providing fund investors with more information as to how the funds vote their holds, but also that she favors funds voting "yes" on issues that she regards as ESG-favorable. The first priority (providing information to investors) is clearly within the ambit of the SEC; the second priority (suggesting that funds ought to vote a certain way to "maximize" value) may not be.

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