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September 22, 2011
Ceres Issues Proxy Voting Guidance
    by Robert Kropp

A new report argues that institutional investors without clear guidelines on sustainability issues run the risk of breaching their fiduciary duty.

The 2011 proxy season saw shareowner support for environmental and social resolutions top 20% for the first time. Still, according to a new report from Ceres, "The largest asset managers often fail to take advantage of this opportunity to promote key governance and sustainability reforms at large public companies, including the types of reforms that may have averted the recent financial crisis."

"Investors can no longer afford to ignore or abstain from taking a position on increasing environmental and social challenges companies are facing, including climate change, water scarcity and human rights," Mindy Lubber, president of Ceres, stated. "Shareholders have a fiduciary responsibility to vote their proxies on these issues, but in too many instances it isnít happening due to weak voting guidelines."

The report, entitled Proxy Voting for Sustainability, seeks to correct the absence of guidelines by providing sets of principles to help investors decide how to vote on resolutions addressing governance, social issues, general sustainability, and environmental performance.

Linked to each of the principles are examples of existing shareowner resolutions.

While the guidance provides a framework for a sustainable proxy voting policy, it is not prescriptive. One the other hand, the report points out, if an investor's current policy does not reflect the principles espoused by the report, then the investor's votes are less likely to support an emerging sustainable economy, and may fail to prioritize long-term share value as well.

"You cannot defer to the opinion of specific management bodies in deciding how to vote on issues that will help determine business success or failure and significantly impact long-term value creation in the coming years," the report concludes. "If you fail to specifically address these issues in your guidelines, you run a serious risk of breaching your fiduciary duty by voting inconsistently or failing to vote on resolutions of critical importance to the companies you own and the shareholders or beneficiaries to whom you owe your fiduciary duty."


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