Sunday, January 08, 2017

Is Your Mutual Fund Company Taking Climate Change Seriously? - Ceres

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The vast majority of climate scientists (97 percent) believe climate change is real, but what about your mutual fund company?  We examined how the nation’s largest mutual fund companies voted on climate-related shareholder resolutions in 2015 and 2016.  The results are revealing.

While the great majority of mutual fund companies voted in favor of many climate-related resolutions (as shown on the chart below), a number of the largest firms failed to support any of the resolutions, including big-name players such as American Funds, BlackRock, Dimensional, Fidelity, Pioneer, Putnam, and Vanguard.  These firms collectively manage trillions of dollars in assets, and their support of climate resolutions could contribute to majority votes for some resolutions – resulting in enormous pressure on companies to disclose their plans for addressing wide-ranging climate-related risks.

Let's review why institutional investors file these resolutions and why companies should be disclosing and addressing climate-related risks.  First, climate change creates profound risks for many companies and the global economy, and these risks need to be disclosed by companies, as a task force (chaired by Michael Bloomberg) of the Financial Stability Board of the G20 summarizes here.

Second, virtually every country in the world has agreed to reduce climate-warming pollution significantly via the Paris Climate Agreement that formally entered into force in November.  The transition to clean energy that is already well underway threatens conventional business models of fossil fuel producers like ExxonMobil and creates a substantial risk of stranded assets and devaluation.  Simply put, the business case for companies to disclose and act on climate risks – whether from extreme weather and other physical risks, or carbon-reducing regulatory risks – is powerful.

So why would a mutual fund company vote against nearly every shareholder resolution asking companies to disclose their risks and strategies for dealing with these powerful trends?

Here we explore three possible explanations – none of them are good:

Read more at Is Your Mutual Fund Company Taking Climate Change Seriously?

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