Although the three largest mutual fund companies in the U.S. (American Funds, Fidelity and Vanguard) voted on a number of shareholder resolutions related to climate change, none of the resolutions passed, according to an analysis of proxy votes cast in 2011. American Funds, Fidelity and Vanguard managed over $1.6 trillion in U.S. securities in 2011. American Funds voted against every climate change resolution filed in 2011. Fidelity abstained on 89 percent of the resolutions, and voted against 11 percent of them, while Vanguard abstained on 88 percent of the resolutions filed, and voted against 12 percent.
Ceres analyzed the proxy votes cast by 44 of the largest U.S. mutual fund companies. In total, Ceres tracked 111 resolutions filed with 81 U.S. and Canadian companies during the 2011 proxy season on climate change and sustainability. The analysis found that other mutual fund companies fared better. The funds with the best voting record included TIAA-CREF, Wells Fargo, Fifth Third, Credit Suisse, Oppenheimer, GMO and Delaware.
“Mutual fund companies have a fiduciary duty to vote in the best interest of their clients, but in the case of climate change, many are not doing so,” said Mindy Lubber, president of the sustainability advocacy group Ceres, which commissioned the analysis.
“Shareholder resolutions are a key mechanism for shareholders to strongly encourage companies to disclose these risks and actions for managing them,” Lubber added.
The analysis does indicate an improvement. A 2007 Ceres report found that in 2006 none of the largest U.S. mutual funds voted in favor of shareholder resolutions concerning climate change. The 28 investment management companies running the largest 100 funds either abstained from or opposed resolutions calling for more disclosure on the impact of climate change on business in 2006. The 2007 report indicates there is a pattern: the funds that either abstained or opposed resolutions included American Funds, Fidelity Investments, and Vanguard Group. However, TIAA-CREF did vote in favor of climate change resolutions.
Ceres released a report in January titled, Institutional Investors’ Expectations of Corporate Climate Risk Management. The report listed the steps that institutional investors expect companies to take:
- Clearly define board and senior management responsibilities and accountability processes for managing climate change risks and opportunities
- Integrate the management of climate change risks and opportunities into the company’s business strategy
- Make commitments to mitigate climate change risks: define key performance metrics and set quantified and time-bound goals to improve energy efficiency and reduce greenhouse gas emissions in a cost-effective manner; and set goals to address vulnerabilities to climate change
- Make a systematic review of cost-effective opportunities to improve energy efficiency, reduce emissions, utilize renewable energy and adapt to climate change impacts
- Prepare and report comprehensive inventories of greenhouse gas emissions; data should be presented to allow trends in performance to be assessed and it should include projections of likely changes in future emissions
- Disclose and integrate into annual reports and financial filings, the company’s view of and response to its material climate change risks and opportunities, including those arising from carbon regulations and physical climate change risks
- Engage with public policy makers and other stakeholders in support of effective policy measures to mitigate climate change risks
Chart from Ceres