FOR IMMEDIATE RELEASE
New Report: Major Mutual Funds Increase Support for Shareholder Resolutions on Climate Change
Fund Giants Fidelity, American Funds and Vanguard Lag Rest of Industry in Failing to Support Any Climate Resolutions in 2008
A growing number of investors are pressuring companies whose stock they own to boost their attention to the business risks and opportunities posed by climate change. So they’re increasing the number of shareholder resolutions aimed at moving companies in that direction – and major mutual funds increasingly are voting with them, according to a new Ceres report.
“Mutual Funds and Climate Change: Growing Support for Shareholder Resolutions, ” a report issued today, can be found on the Ceres website. It finds that a dozen major fund companies – led by TIAA-CREF, Charles Schwab and Credit Suisse – cast a majority of their 2008 proxy votes in favor of climate-related resolutions. In the four previous years, only five companies, on average, had done that. A new high was also reached in the overall percentage of favorable votes by mutual fund companies.
But several fund giants still lag the rest of the industry in their handling of climate resolutions: Fidelity and Vanguard did not support a single climate resolution in 2008 or in the previous four years. Climate resolutions typically ask companies to disclose their potential risks from climate change and their strategies for minimizing those risks and seizing new market opportunities.
“Momentum is moving in the right direction but there’s lots of room for improvement from this powerful industry,” said Ceres President Mindy S. Lubber. “All mutual funds should be changing their proxy voting practices to support climate-related resolutions. When mutual fund companies vote against climate resolutions, it raises serious questions about whether they’re violating their fiduciary duty by not representing their customers’ long-term financial interests.”
The new report analyzes 74 mutual fund families’ proxy votes on shareholder-sponsored climate change resolutions over the past five proxy seasons (2004-2008) and incorporates a total of 13,200 votes on 76 resolutions. Fund groups were chosen for analysis based on their size, brand power and the availability of data spanning five years. Collectively, these funds manage approximately $3.8 trillion.
In 2008 these fund families supported an average of 23.6 percent of the climate change resolutions they faced – a significant increase over their 14.7 percent average support in 2007.
Key findings of the study include:
- The notable increase in resolution support by mutual fund families, when combined with an increase in abstentions by some of them, led to a significant decrease in opposition to climate resolutions by mutual funds compared to previous years;
- Leaders among mainstream mutual fund companies on proxy voting in 2008 include: TIAA-CREF, Charles Schwab and Credit Suisse;
- Twelve mainstream fund companies supported more than 50 percent of climate resolutions in 2008, up from an average of five companies for the previous four proxy seasons;
- Poor performers in 2008 include the largest mutual fund companies – American Funds, Fidelity, Vanguard and State Street Global Advisors - each of which failed to support even a single climate resolution;
- Some well-known fund companies continued 2007’s inconsistent behavior by voting against most (or all) climate resolutions even after having issued research reports on climate risks and opportunities. These include State Street Global Advisors and JPMorgan Chase;
- The investment community as a whole (mutual funds, plus all other investors) is supporting climate resolutions at record levels.
Recommendations for mutual fund companies include:
- Update proxy voting guidelines to stipulate support for climate resolutions that address material risks
- Move from abstentions and opposition to voting in support
- Align voting with investment research on climate risks and opportunities.
Separately from the mutual funds, the number of shareholder resolutions on global climate change plus average shareholder support for those resolutions also hit new highs in 2008. The average vote on climate resolutions in 2008 grew to 23.4% from 20.5% in 2007. 23.4 percent is not insignificant in the world of shareholder resolutions since substantial minority support for a resolution is often enough to move company management. That support level ranks climate change resolutions among the most widely-backed resolutions in all social and environmental categories. This is likely due to growing awareness of the profound financial implications of climate change for many businesses.
The report was authored for Ceres by Jackie Cook, the founder of Fund Votes (www.fundvotes.com), an independent project established in 2004 and based in Vancouver, Canada. Fund Votes tracks mutual fund proxy voting in the US and Canada. Data drawn from the database of over 13.5 million decisions spanning five years of mutual fund proxy voting in the U.S. and three years in Canada have been used in a number of industry reports and news articles. Over the past 11 years Jackie has worked in various research positions, both in the UK and the USA, focusing on corporate governance and corporate social responsibility, most recently as a Senior Research Associate at The Corporate Library.
Ceres is a leading coalition of investors, environmental groups and other public interest organizations working with US companies to address sustainability challenges such as climate change. Ceres also directs the Investor Network on Climate Risk, a network of 80 institutional investors with collective assets totaling $7 trillion focused on the business impacts of climate change. For more information visit www.ceres.org or www.incr.com.