June 6, 2012
June 6, 2012—While most people recognize the threat posed by climate change, a recent report concluded that many large mutual funds were largely ignoring the risks it poses to the companies they had invested in and the planet.
The report, released by Ceres – a network of investors, companies and public interest groups dedicated to expanding sustainable business practices – details the poor proxy voting records of the largest mutual fund companies on the issue of climate change. Of the 44 largest U.S. fund companies, market leaders Fidelity, Vanguard and American Funds ranked 40th, 42nd and dead last, respectively, on their support for resolutions on climate change in 2011. Meanwhile, Green Century Capital Management (Green Century), the investment advisor to the environmentally responsible Green Century Funds, voted in favor of 100% of resolutions that call for increased climate impact disclosure and better climate change management in the 2011 proxy season, and is on track to do so again in 2012. The survey included relevant environmental issues such as hydraulic fracturing, or fracking, and coal ash management – two issues where Green Century regularly challenges companies to better address their risks.
At annual company shareholder meetings, investors often have the opportunity to vote on a number of social, environmental and governance issues that impact companies. Mutual funds, which represent the pooled investment money of thousands of smaller investors, vote at the annual meetings of the companies they own on behalf of their investors. As Mindy Lubber, President of Ceres and the first President of Green Century, explains, “Shareholder resolutions are a key mechanism for shareholders to strongly encourage companies to disclose these risks and actions for managing them.”
For investors concerned about comprehensive risk management, the climate voting records of the large mutual fund groups should raise some red flags. “Mutual fund companies have a fiduciary duty to vote in the best interest of their clients, but in the case of climate change, many are not doing so,” said Lubber. “Most large companies face significant climate-related risks, including physical and regulatory impacts, but many are ignoring them,” she continued. Her views are echoed by Deutche Bank and Generation Investment Management, which have generated significant financial and analytical research on climate impacts and associated risk management strategies.
Green Century consistently supports resolutions related to the environment at the companies its Funds own. Green Century does so not only to act on the values of its Funds’ investors, but because managing environmental risks is a critical component of its strategy to seek long-term total returns. Green Century also rigorously screens its Funds’ holdings for poor environmental performers, while seeking to invest in environmentally innovative companies.
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