Support Split Among Leaders and Laggards, with TIAA-CREF, Wells Fargo Leading on Voting Support and Vanguard, State Street Failing to Support Any Climate-Related Resolutions
April 8, 2011
BOSTON – U.S. mutual funds’ proxy voting patterns for climate-related shareholder resolutions are not keeping pace with the escalating risks associated with climate change. Mutual funds’ overall support of these resolutions dropped from 27 percent in 2009 to 24 percent in 2010, after rising steadily the previous three years.
That is the finding of Ceres’ sixth annual analysis of U.S. mutual fund votes by 46 leading mutual fund families collectively managing approximately $6 trillion in assets. The analysis was jointly conducted with Fund Votes, which has tracked U.S. mutual fund voting since reporting was first required in 2004.
Survey results show that support of climate-related shareholder resolutions is split between leaders and weak performers. Leading the way are eight mutual fund companies – including TIAA-CREF, Dimensional Fund Advisors, Wells Fargo and Credit Suisse – that voted in support of more than 50 percent of climate-related shareholder resolutions in 2010.
Yet, as in past years, giants State Street and Vanguard lagged behind, joining the ranks of eight additional mutual fund companies – including Fidelity, American Funds and Columbia Management – that failed to support nearly 99 percent of climate-related shareholder resolutions.
In the coming months, Ceres will reach out to the survey’s weak performers to discuss how they plan to address future climate-related shareholder resolutions.
“Reduced mutual fund support for climate-related resolutions is troubling given the increasing evidence that climate change impacts are accelerating and posing significant financial risks to investment portfolios,” said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk. “All mutual funds should develop and follow proxy voting guidelines to respond to the very real risks and opportunities of climate change. Those that do stand to outperform their peers.”
Recent research by Trucost and RLP Capital found that mutual funds incorporating environmental, social and governance analysis—including climate change considerations—into their investment decisions outperformed traditional funds over one- and three-year periods. The funds also had higher alpha, or risk-adjusted performance, over the three years.
In February 2010, the U.S. Securities and Exchange Commission issued interpretive guidance outlining the types of climate-related risks companies must disclose in their financial filings. Since then, impacts consistent with climate change have rippled across the market –from Australia and Pakistan’s catastrophic floods inflating commodity prices for coal and cotton to the Russian heat wave that reduced grain yields by 40 percent and spurred numerous wildfires.
One possible explanation for the drop in U.S. mutual funds’ support of climate-related shareholder resolutions could be a perceived reduction in regulatory risk due to the new political climate and collapse of comprehensive climate legislation, the survey says. However, the U.S. Environmental Protection Agency is taking steps to begin regulating greenhouse gases under the Clean Air Act, as required by the Supreme Court, and many countries around the world are putting policies in place to reduce carbon.
“Large fund families know, just as we do, that climate change is a real and material risk,” said Jackie Cook, founder of Fund Votes. “Yet their proxy voting guidelines are silent. Climate and sustainability are central to performance and need to be specifically addressed in voting policy reviews.”
To read the report, visit www.ceres.org
Ceres leads a national coalition of investors, environmental groups and other public interest groups working with companies to address sustainability challenges such as global climate change. Ceres also directs the Investor Network on Climate Risk, a network of 96 institutional investors with $9.5 trillion of collective assets focused on the business impacts of climate change. For details, visit www.ceres.org.
About Fund Votes
Fund Votes is an independent project started in 2004 that tracks mutual fund proxy voting in the U.S. and Canada. The database of more than 23 million indexed proxy voting decisions by large financial institutions spans seven years of mutual fund proxy voting disclosure in the U.S. and five years in Canada. Fund Votes’ data has been used in a number of reports by groups such as Ceres, SHARE, The Corporate Library, the American Federation of State, County and Municipal Employees (AFSCME), Investors’ Environmental Health Network (IEHN) and the Center for Political Accountability as well as a number of news articles for news groups including Reuters, the Boston Business Journal, SocialFunds and IR Magazine. For details, visit www.fundvotes.com.
communications outreach manager | Ceres
99 Chauncy St | Boston, MA 02111
t: (617) 247-0700 x 148 | Cell: (617) 319-6457