Skip to content
Link copied to clipboard

Fund firms cool to climate issue

A study discovered no support by the largest ones for stockholder resolutions about global warming.

NEW YORK - Investors pressing companies to say more about the possible financial effects of global warming have not found an ally in large mutual funds.

While global climate change appears to be drawing more attention in the United States from lawmakers and businesses, no large mutual-fund companies voted in 2006 to support shareholder resolutions seeking added disclosures about the possible financial effects of global warming.

The 28 investment houses that run the country's 100 largest mutual funds abstained from or opposed the handful of resolutions that reached a vote last year, according to data compiled by Institutional Shareholder Services for Ceres, a Boston-based environmental investment group.

"Most mutual funds tend to wall off social and environmental resolutions as a separate category from governance resolutions. On the social and environmental side, they tend to show more deference to management's actions and policies than they do on the governance side," said Doug Cogan, director of climate change research at ISS, a proxy adviser.

Cogan said U.S. companies operating overseas, and even those that do business only domestically, face increasing environmental regulation, such as caps on greenhouse-gas emissions. Such changes could increase costs for power companies and automakers, for example. On the other hand, warmer weather could extend growing seasons for agricultural companies.

"It's truly a business issue that will have financial impacts," he said.

The study found that investors filed 30 climate-related resolutions last year, and that seven of those proceeded to shareholder votes.

On average, the resolutions put to a vote drew support from 17 percent of shareholders, the study found. In some instances, the "yes" votes were much higher; at home builder Standard Pacific Corp., 39 percent of shareholders voted for added disclosures.

Ceres spokesman Peyton Fleming said that shareholders at companies such as Alliant Energy Corp. and Great Plains Energy Inc. withdrew resolutions last year after the companies agreed to disclose their potential financial exposure to climate change.

Cogan said about half of such shareholder resolutions typically were withdrawn before they came to a vote, because companies agreed to provide the data investors were seeking.

Large mutual-fund companies typically do not wade into environmental issues. It appears many would consider doing so, however, if they determined such concerns would have a sizable effect on a company's business.

"Our mutual funds are managed with one overriding goal, which is to provide the greatest possible return to mutual-fund shareholders," said Vin Loporchio, spokesman at Fidelity Investments, the nation's largest fund manger.

"If it is shown that an environmental risk poses a real and material risk to a company's future earnings, that could well be taken into account," he said.

Vanguard Group, of Malvern, said in a statement that its funds "typically abstain from voting on proposals related to environmental issues unless they have a significant, tangible impact on the value of a fund's investment and management is not responsive to the matter."

Some groups, such as the California Public Employees' Retirement System, which is known for its stance on environmental issues, have been voting their shares in favor of such resolutions.

"I think there has been a real increase in the legitimacy of these issues," said John Wilcox, senior vice president and head of corporate governance at the financial-services group TIAA-CREF, which has supported resolutions regarding future environmental costs to business.

"We don't want to assert a moral bias," he said, adding that TIAA-CREF hoped companies would examine environmental issues from a "strategic viewpoint."

Wilcox also said that, while companies should try to determine the possible effects of climate change and resulting regulation, shareholders should not saddle companies with unreasonable requests.

"They cannot demand the companies file detailed information that would be so burdensome to collect that it would tax the resources of the companies," Wilcox said.

Cogan said companies should start to develop some scenarios for what might happen amid a changing climate.