September 10, 2004
New Web Tool Identifies Climate Risk and Opportunity in 24 Biggest Mutual Funds
by William Baue
KLD Research & Analytics information reveals both positive and negative corporate performance on
climate change, allowing retail investors to lobby their mutual funds.
Recent events are indicating that acceptance of the reality of climate change, and the associated
risk to business, is continuing to widen. After years of questioning the link between human
activity and climate change established by the Intergovernmental Panel on Climate Change (IPCC), the Bush Administration finally acknowledged
the link in a recent report. This week, the Conference Board, best known for
issuing research on more mundane economic indicators, released a report on the
business implications of scientific findings linking human activity climate change.
While humans may contribute to global warming, they can also act to address and possibly
reverse it. Toward this end, the nonprofit Results for America, a project of the Civil Society
Institute (CSI), launched a website this week allowing everyday
investors to research the degree to which companies in their mutual funds exacerbate or mitigate
climate change. The site allows individual investors to investigate the 24 largest equity mutual
funds in terms of assets, based on data from Yahoo! Finance, focusing on each fund's top 25 holdings
according to Morningstar.
site provides in-depth research from KLD Research &
Analytics, a socially responsible investment (SRI) research firm, on companies with significant
climate change-related risks as well as those with positive climate-related opportunities.
"People who mistakenly think that global warming doesn't have anything to do with them need
only look into their mutual funds to find how they have a very real pocketbook stake in whether or
not corporations heed the call to deal responsibly with climate change issues," said Pam Solo,
president of CSI. "The purpose of this website is simple: It empowers small investors with the
information they need to make informed choices about mutual funds."
While the information
may prompt some investors to shift their money from mutual funds with high exposure to climate
change risks to funds that more proactively support sustainability, it may equip and inspire other
investors to dialogue with their fund firms.
"I'd like to see shareholders lobby their
mutual funds--that's how to effect change at the corporations," said Peter Kinder, founding
president of KLD. "When you think of this site being launched ten days after mutual funds first
reported their proxy votes, the importance of letting people know what they own becomes clear."
The new Securities and Exchange Commission (SEC) rule requiring mutual fund proxy vote disclosure stands to
prompt investor questioning of mutual fund votes that seem inconsistent with shareowner interests,
just as this web tool may inspire similar activism.
The site's search tool focuses on
funds from four complexes: American Funds, Dodge & Cox, Fidelity, and Vanguard. Of the 224 companies in the funds' top holdings, KLD
research reveals "negative" or "positive" information on 71 of the companies.
search of the Vanguard 500 Index fund finds that more than half (13) of its top 25 holdings to be
companies where shareowner value could be jeopardized by climate risks or enhanced by
climate-related opportunities. Risk-exposed companies include ChevronTexaco (ticker: CVX), ExxonMobil (XOM), and General
while companies with climate-related opportunities include Bank of America (BAC), Johnson & Johnson (JNJ), and UPS (UPS).
Clicking the name of the company brings up a page with in-depth climate-related information
culled from KLD's SOCRATES
database of corporate social responsibility (CSR) research. The descriptions include very detailed
"In April 2002, the Natural
Resources Defense Council--a US-based environmental advocacy group--published a document that
it claimed demonstrated that ExxonMobil had lobbied the Bush administration to push for a more
industry-friendly chair of the Intergovernmental Panel on Climate Change (IPCC), an influential
international science panel monitoring the causes and impacts of global warming," states the
profile. "According to an April 2002 Los
Angeles Times article, the memo from the company to the White House revealed that an
ExxonMobil official urged replacing the American scientist chair with an Indian engineer and
economist. The American scientist, an atmospheric chemist, was criticized by the energy industry
for suggesting more industry regulation."
Compare this to a more favorable profile:
"Johnson & Johnson is one of twenty companies which have agreed to purchase at least 10 percent
of their electricity from renewable sources through the Environmental Protection Agency's (EPA) Green Power Promotion program," the profile
states. "In August 2003, the company announced plans to build a fuel cell generator to supply
approximately 10 percent of the energy needs of its headquarters in New Brunswick starting in the