Last year, PwC released a report presenting seven reasons why investors care about sustainability. The first one was “sustainability shareholder resolutions gaining traction,” showing growing support by investors for environmental and social shareholder resolutions. “In 2010, a Ceres survey of 44 asset owners and 46 asset managers with collective assets totaling more than $12 trillion found nearly all respondents viewed climate change as a material concern,” PwC wrote.
Now, a new study from Ceres shows that while many investors might say they view climate change as a material concern, when it comes to voting on shareholder resolutions filed with companies on climate change business risks, they act like they don’t.
The study is an analysis of proxy votes cast in 2012 by 43 of the largest U.S. mutual fund companies. Among more than 40 large U.S. mutual fund families that were included in this study, only eight have an average support of over 50 percent for climate-related shareholder resolutions. Among these eight fund families, only three supported the vast majority (over 80 percent) of these climate-related shareholder resolutions – DWS, AllianceBernstein and Oppenheimer.
The picture is not totally grim as some investors actually did much better in 2012 compared to their past performance. For example, DWS, which is at the top of the list with 93 percent average support, had never cast a single vote in support of climate-related resolutions tracked by the study. Another example is AllianceBernstein, who “had cast only two votes in support of climate resolutions over the previous 10 proxy seasons, until voting for 21 of the 26 resolutions that came to vote across its portfolio funds in the 2012 proxy season.”
At the bottom of the list you can find six fund families who failed to support even a single climate-related resolution in 2012, including BNY Mellon, Franklin Templeton, ING, Pioneer, Putnam and Vanguard. In addition, there are 12 fund families with average support of less than 10 percent, including Blackrock, Fidelity and Schwab.
In the middle of the pack, you can find some of the largest investment banks like JP Morgan (47 percent) or Goldman Sachs (40 percent). While their performance is better than most of the other mutual fund families, it is still somewhat disappointing if you take into consideration their commitments on climate change. For example, Goldman Sachs writes the following on its environmental policy framework:
“Goldman Sachs will increase our commitment to systematically incorporate environmental, social and governance criteria into fundamental analysis of companies. We believe that companies’ management of environmental and related social risks and opportunities may affect corporate performance. We further believe that the management of risks and opportunities arising from climate change and its regulation will be particularly significant and will garner increasing attention from capital market participants.”
If this is the case, then it’s not clear why Goldman Sachs wouldn’t support 100 percent of the climate-related shareholder resolutions. They typically, as the Ceres study mentions, request that companies disclose climate-related risks they are facing and strategies for managing those risks, including greenhouse gas reduction plans.
Goldman Sachs is not the only investor that doesn’t seem to walk the talk, and it begs the question: Why do so many investors claim that climate change is a material concern but fail to support resolutions that are supposed to help the companies they invest in better address this concern?
I believe that behind this gap you can find similar reasons as those that explain the gap between the overwhelming support of consumers for green products in studies and their actual behavior. Just like with consumers, when they actually need to take action, investors apparently have other considerations in mind that probably outweigh their supposed commitment to addressing climate change as a material issue.
In addition, this study looks at the proxy season of 2012 which took place before Hurricane Sandy. I have a feeling that back then most investors didn’t see climate change risks as an immediate concern, which might have been reflected in their voting decisions. It will be interesting to see if, and to what extent, this sentiment has changed in 2013.
Last, but not least, let’s face it – most investors still don’t see climate change as a material issue. If you look at the 2012 US SIF report on sustainable and responsible investing trends in the U.S. you see that among the ESG criteria used by SRI investors, climate change is ranked in 8th place, affecting the management of $134 billion in assets. While it might sounds like an impressive figure, in total this figure equals to less than one percent of the broader universe of assets under professional management in the United States (about $33 trillion).
So, if you take into consideration that investors use climate change criteria in their investment decisions in less than one percent of their overall investments, the results of Ceres’ study shouldn’t come as a surprise. This study only affirms that attention to climate change risks is growing among investors, but in baby steps and is still relatively low. Before this issue can move forward, we will need to see more investors who walk the talk when it comes to shareholder resolutions.
Raz Godelnik is the co-founder of Eco-Libris and an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and the Parsons The New School for Design, teaching courses in green business, sustainable design and new product development. You can follow Raz on Twitter.