U.S. Mutual Fund Investors 'at Odds' with Fund Managers on Global Warming, Surveys Say

U.S. Mutual Fund Investors 'at Odds' with Fund Managers on Global Warming, Surveys Say

Seven out of ten U.S. mutual fund investors now want their mutual funds to support global warming shareholder resolutions, but not one of the nation's largest mutual funds voted in favor of any climate change proxy measures during 2005, according to a major new public opinion survey from the Civil Society Institute (CSI) and a report prepared for the Ceres investor coalition.

The new Ceres report shows that while many of the nation's institutional investors are routinely supporting global warming resolutions, none of the nation's 100 biggest mutual funds -- including those managed by Fidelity, Vanguard and American Funds -- supported any of the 33 global warming resolutions filed with US companies in 2005. However, the new CSI survey shows that a clear of majority U.S. mutual fund investors want their mutual fund managers to vote in favor of the global warming resolutions and also to actively screen companies linked to climate change woes.

"Mutual funds investors and their their funds are completely at odds today on the topic of global warming," added Pam Solo, president of the Civil Society Institute, which polled 845 mutual fund investors on the issue. "Our new survey shows that seven out of ten American mutual fund investors want their mutual funds to screen companies linked to global warming and also to take action on shareholder resolutions calling on corporations to address climate change issues."

"Mutual funds are a critical missing link in the push for better corporate disclosure about climate risks," said Mindy S. Lubber, president of Ceres and director of the Investor Network on Climate Risk, which includes $3 trillion of institutional investors. "Mutual funds are ignoring the growing evidence that climate change will have far-reaching fiscal impacts on a wide range of business sectors, whether from rising insurance claims due to hurricanes and other natural disasters or growing worldwide demand for hybrid vehicles and other 'clean' technologies."

Today, Co-op America unveiled a Web-based action campaign where mutual fund investors can go to urge the three largest U.S. fund families -- Fidelity, Vanguard and American Funds, which collectively manage over $1 trillion in assets -- to start voting in favor of global warming proxy resolutions.

"Mutual funds, which are responsible for the retirement investments of millions of investors, should be at the forefront of investors encouraging companies to address global warming," said Alisa Gravitz, executive director of Co-op America. "Instead, all of the largest funds of America's major mutual fund families -- including Fidelity, Vanguard and American Funds -- failed to vote in favor of any resolutions in 2005 encouraging companies to address global warming. Getting these funds to vote in favor of resolutions to address global warming would make a tremendous difference for investors and the environment."

Key CSI Survey Findings

The major new survey conducted by Opinion Research Corporation (ORC) for the Civil Society Institute focused on a sample of 845 U.S. mutual fund investors. The survey found:
  • Three out of four mutual fund investors (74%) want their "mutual fund to ask questions about the potential impact of global warming on the companies in which they are investing your money." More than four out five women (83%) want their mutual funds to ask the tough questions about investing in companies tied to global warming, as opposed to slightly less than two thirds of men (64%).
  • About seven out of ten mutual fund investors (71%) said "yes" when asked: "Many investors are filing shareholder resolutions with companies requesting that company management pay closer attention to global warming concerns and problems. Do you think your mutual fund should support these resolutions on your behalf?" Just one quarter of the respondents said "no" (including only 11% who said "definitely no").

  • Roughly seven in ten mutual fund investors (71%) said they would not "invest directly in a company that is a major source of pollution linked to global warming, whether from its operations or the products it produces." Of this group, more than a third (36%) responded "definitely no" versus less than a quarter (23%) who said "yes" (including just 6% "definitely yes"). Female mutual fund owners are considerably more likely than their male counterparts -- by a margin of 82% to 60% -- to be opposed to investing directly in polluters tied to global warming.

  • About four in five mutual fund investors (79%) "think that companies should analyze the long-term financial impacts that global warming will have on their businesses and on the potential value of their stock to people who either own shares directly or indirectly through a mutual fund." Well over two-fifths of mutual funds investors (45%) responded "definitely yes") versus fewer than one in five (16%) who said "no" (including just 6% responding "definitely no").
Key Ceres Report Findings

The Ceres-commissioned report Unexamined Risk: How Mutual Funds Voted on 2005 Climate Change Shareholder Resolutions analyzes how the nation's 100 largest mutual funds voted their shareholder proxies on 33 climate change resolutions filed at the 2005 corporate annual meetings. The shareholder resolutions asked companies to disclose the financial risks and opportunities posed by climate change and, in some cases, their strategies for controlling greenhouse gas emissions. The report, prepared by the Investor Research Responsibility Center (IRRC), shows the following:
  • None of the 100 largest mutual funds whose specific votes were analyzed supported any climate change resolutions in 2005.

  • None of the 31 investment management companies routinely supports shareholder proposals seeking more corporate disclosure on climate change.

  • 28 of the 31 investment management companies have proxy voting policies that require them to oppose or abstain on all environmental-related resolutions, including climate change resolutions. Among those 28 companies with such policies are mutual fund giants, Fidelity, Vanguard and American Funds, which collectively manage more than $1 trillion of the assets held in the top 100 mutual funds (equal to 70% of the total).

  • Only three mutual fund companies-Columbia, Franklin Templeton and Neuberger Berman-have guidelines that even allow some proxy votes to be cast in favor of climate change proposals.
The results come as global warming shareholder resolutions have received record high voting supporting from investors in 2004 and 2005, including 28% shareholder support for a resolution filed last year with ExxonMobil asking the company to disclose the impacts of the Kyoto Protocol on its business. It was the highest vote ever on a climate resolution filed at ExxonMobil. Three of the nation's largest public pension funds which collectively manage over $400 billion in assets and the largest private pension fund, TIAA-CREF, all routinely supported global warming resolutions in 2005.

Doug Cogan, deputy director of social issues at IRRC, said: "This report finds that virtually none of the top 100 U.S. equity mutual funds are addressing climate change through affirmative proxy voting policies. Despite the rising financial stakes and significant actions taken by other institutional investors, mutual funds have shown a near-universal lack of interest in supporting climate change resolutions since the proxy voting disclosure requirements went into effect two years ago."