The Big Chill

The number of institutional investors weighing in on the risks of climate change has increased dramatically over the past few years, but the feeling isn’t mutual. Mutual funds, that is. The three largest public pension funds in the U.S. and the largest private pension fund, TIAA-CREF now have policies to routinely support resolutions calling on companies to address the risks of climate change. Financial giant Goldman Sachs adopted a major new environmental policy a few months ago, which included the statement, “Goldman Sachs is very concerned by the threat to our natural environment, to humans and to the economy presented by climate change and believes that it requires the urgent attention of and action by governments, business, consumers and civil society to curb greenhouse gas emissions.” Shareholder resolutions on climate change have reached record vote levels at ExxonMobil and other companies over the past two years. Yet they’ve achieved this support without the votes from most mutual funds, which now hold nearly a quarter of all shares in U.S. companies.

Indeed, a new study produced for the investor coalition Ceres by the Investor Responsibility Research Center found that none of the 100 largest mutual funds in the U.S. supported any of the 33 resolutions on climate change that came to a vote at U.S. companies last year. The study found that of the 31 investment companies that manage the largest 100 mutual funds in the U.S., 28 of them have adopted policies that require them to either vote against all environment-related shareholder resolutions or to abstain from voting. This includes American Funds, Fidelity, and Vanguard, which together account for 70 percent of the assets held in the top 100 mutual funds. Only three of the investment companies had policies allowing them to vote for climate change resolutions on a case-by-case basis, although none of them chose to support any of the climate resolutions pending in 2005.

Mutual funds’ voting records on climate change are not only out of step with an increasing number of pension funds and other major investors, they are also out of step with the wishes of their own clients whose shares they are using to cast their votes. The Ceres study was accompanied by an opinion poll of mutual fund investors sponsored by the Open Society Institute. That poll found that 71 percent of mutual fund investors said they wanted mutual funds to “support shareholder resolutions asking company management to pay closer attention to global warming concerns and problems.” It also found 79 percent of investors said that “companies should analyze the long-term financial impacts that global climate change will have on their business and on the potential value of their stock,” something that most of the 33 pending shareholder resolutions on climate called on companies to do.

Mindy Lubber, Executive Director of Ceres and of the Investor Network on Climate Risk said of the findings, “Mutual funds are a critical missing link in push for better corporate disclosure about climate risks.” Civil Society Institute Pam Solo said, “The fact that mutual funds are missing in action on climate change is an unacceptable situation that investors should insist on changing.” One way individuals can weigh in to try to correct this situation is to visit Co-Op America’s mutual fund action page by March 31 to join the thousands of people sending letters to American Funds, Fidelity, and Vanguard asking them to change their proxy voting guidelines. And Trillium Asset Management’s clients can rest assured that under our own proxy voting guidelines, we consistently vote our clients’ shares in favor of resolutions asking for companies to address the risks of climate change.