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April 11, 2011
Mutual Fund Votes for Climate Resolutions Decline
    by Robert Kropp

Ceres and Fund Votes conduct annual survey of voting by mutual funds on shareowner resolutions relating to climate change, and find they have declined for first time since 2007.


A report published earlier this year by Mercer declared that the economic cost of climate policy could lead to as much as a 10% increase in portfolio risk in the next 20 years. Responding to the report, Mindy Lubber, president of Ceres, stated, "No prudent investor can disregard a risk as great as 10 percent on portfolio performance."

Evidently, many of the nation's largest mutual funds appear to be doing just that, according to the
sixth annual analysis of voting by 46 mutual funds on climate-related shareowner resolutions. The analysis by Ceres and Fund Votes, a project started in 2004 that tracks mutual fund proxy voting in the US and Canada, found that for the first time since 2007, overall voting in favor of such resolutions declined, to 23.8% from 26.9% in 2009.

Votes opposed to such resolutions increased for the first time since 2005, to 60%.

The analysis found that eight mutual fund families continued to support a majority of climate resolutions, led by the
Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), which voted in favor of such resolutions 82.6% of the time.

On the other hand, some of the nation's largest funds, including State Street and Vanguard, did not vote in favor of a single climate resolution. Fidelity voted in favor of such resolutions in just 1.6% of 246 total votes. According to the report, 27 mutual fund companies supported less than a quarter of climate resolutions.

"One possible reason for diminished support could be that mutual fund managers perceived reduced regulatory risk as the prospects for passing a federal climate bill dimmed during the 2010 proxy season," the report stated.

The report recommended that investors encourage mutual funds to update their proxy voting guidelines, and consider switching to investment managers that better understand the risk to portfolios presented by climate change.

"Investors can also outsource the voting of their proxies" through such sites as
Moxy Vote, the report concluded.

"Large fund families know, just as we do, that climate change is a real and material risk," Jackie Cook, founder of Fund Votes, stated. "Yet their proxy voting guidelines are silent. Climate and sustainability are central to performance and need to be specifically addressed in voting policy reviews."

Lubber of Ceres stated, "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."

 

 
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