Mutual funds go green by proxy

Mutual funds in Canada focused on responsible investing (RI) are much more active shareholders in regards to proxy voting, according to a new study released this week by the Responsible Investment Association (RIA). Proxy voting is the shareholder right to vote on certain corporate matters, even when the individual or institution is not physically present at annual and special general meetings.

After reviewing hundreds of thousands of individual votes in 2013 from a spectrum of 25 separate mutual funds across the country, it found that RI-managed funds defied company management at a notably higher rate than regular mutual funds. Shareholder resolutions for American and Canadian companies were looked at separately.

“RI mutual funds review all proxy issues, both management and shareholder led, with a critical eye,” said Deb Abbey, CEO of the RIA in a statement. “Their goal is to help build long-term sustainable values for companies and their stakeholders.”

The results were particularly pronounced when it came to governance and environmental issues. The well-known RI funds Inhance, NEI and Oceanrock/Meritas, for example, voted in favour of climate change-related shareholder resolutions 92 per cent of the time. Non-RI funds only supported these votes 39 per cent.

Other common proxy voting topics examined included executive compensation “say on pay” resolutions, the elections and independence of board members and increased transparency for political donations (regarding U.S. companies).

The study comes on the heels of the Ontario government’s regulation update to require pension funds to disclose if consideration of environmental, social and governance factors is reflected in the plan’s investment policy and practice, which extend to proxy voting.

As an organization that has long been dedicated to increased transparency and accountability for publicly traded companies, Corporate Knights has been a strong advocate for a more muscular use of proxy voting to force relevant environmental, social and governance issues into the boardroom.

Our annual responsible investing guide (now discontinued) rewarded funds – in part – for how activist their proxy voting policies were.

For Abbey, strong engagement in corporate stewardship activities such as proxy voting helps to guide their portfolio in a more sustainable direction. “Proxy voting and other stewardship activities by mutual funds and other institutional investors can steer companies and economies,” says Abbey. “RI funds invest in companies that are managing the future.”

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