The Heat Is Online

Mutual Funds Seen Ignoring Climate Risks . . .

Mutual Funds Ignore Climate Change Risks  Ceres, April 24, 2007

BOSTON - US mutual funds are ignoring the business risks of global climate change, said a report Monday that criticized the industry for abstaining from or opposing shareholder pressure for environmental disclosure.

None of America's 100 largest mutual funds voted in 2006 in support of resolutions seeking greater corporate disclosure on how global climate change will affect business, said Ceres, a coalition of investors and environmentalists.

"Mutual funds are a critical missing link in the push for better corporate disclosure about climate risks and opportunities," Ceres President Mindy Lubber said in the report.

"Mutual funds are ignoring that climate change will have far-reaching impacts on numerous business sectors, whether from rising insurance losses from natural disasters, compliance costs from new carbon-reducing regulations or growing global demand for climate-friendly technologies," Lubber said.

Boston-based Ceres, using data compiled by Institutional Shareholder Services, said all 28 of the investment management companies running the biggest 100 funds abstained from or opposed shareholder resolutions last year that called for more disclosure on the impact of climate change.

These firms included the top three in the US$10.6 trillion mutual fund industry -- Fidelity Investments, Vanguard Group and American Funds -- which together manage 55 of the 100 largest funds. None of the 100 funds have explicit proxy voting guidelines on global warming, Ceres said.

By contrast, many institutional investors, including TIAA-CREF and Californian pension funds CalPERS and CalSTRS, "have backed global warming resolutions in growing numbers," it said.

"While mutual funds have been ignoring global warming, pension funds and other investors are winning record-high support for shareholder resolutions and they're pressuring companies to undertake climate risk studies that have never been done before," Lubber said.

Ceres said 30 climate-related resolutions were filed in 2006 with US firms and those that were voted upon received support levels as high as 39 percent, with the average support level being 17 percent.

A Fidelity spokesman said the firm's funds are managed with the "overriding goal" of providing the best return to fund shareholders, and managers can sell the shares of firms should they disagree with the policies or directions taken by management.

"We're making those types of decisions every day, and, therefore, may sell a stock long before an important issue comes to a proxy vote," Fidelity's Vin Loporchio said.

Vanguard spokesman John Woerth said the group's funds typically abstain from voting on proposals related to environmental issues, unless they have a significant and tangible impact on the investment and the management is not responsive to the matter.

American Funds was not immediately available for comment.