Green Governance is happy to announce the launch of the Fund Climate Vote Database. This database shows how 500+ mutual funds and ETFs voted on 87 shareholder proposals related to climate change in 2018.
What do shareholder proposals have to do with climate change?
A shareholder of a public company has the right to vote for proposals that can set the company's policies and priorities. For example, at its 2018 shareholder meeting, Chevron held a vote for a proposal that would require the company to publish a report that details its efforts (if any) to minimize methane (a greenhouse gas with 25 times the impact of carbon dioxide) emissions from its fracking operations. Had the proposal passed a majority vote, shareholders would have sent Chevron a strong signal that they were concerned about its methane emissions. Chevron would likely have taken action to limit emissions — maybe by inspecting for leaks more frequently. The vote on the proposal failed with only 45% of shares voting in favor of the proposal.
Chevron's methane proposal was one of many proposals in the last few years that would encourage companies to adopt policies to fight climate change. Other proposals would require firms to publish greenhouse gas emission reduction targets, adopt fuel-efficiency standards, disclose lobbying expenses, appoint climate change experts to boards of directors, tie executive compensation to sustainability metrics, and move away from fossil fuel-based energy sources.
What do mutual funds and ETFs have to do with shareholder proposals?
When you invest in an ETF or mutual fund, the fund provider uses your money to purchase real shares of real companies. For example, if you invest in Vanguard's Total Stock Market Index Fund, Vanguard uses the money you provide to purchase shares of 3,599 companies — every publicly traded company you've ever heard of and many others. Even though the shares were purchased with your money, Vanguard itself owns the shares, which means Vanguard, not you, gets to decide how to vote those shares on shareholder proposals.
Mutual funds and ETFs have become so popular that they now have a huge amount of influence over corporate policies through votes on shareholder proposals. The three largest fund providers — Vanguard, BlackRock, and State Street — own around 8%, 6%, and 5% respectively of each of the 500 largest companies in the US. They are the largest shareholders, and thus the most important voters, of a large majority of companies.
How do funds vote on proposals related to climate change?
Our database shows that the three largest fund providers vote overwhelmingly against climate change related proposals. In 2018, Vanguard's largest fund voted against 87% of climate change proposals. BlackRock's largest fund voted against 93%. State Street's largest fund voted against 63%.
Vanguard and BlackRock's funds both voted against Chevron's methane emissions proposal. State Street's fund abstained from the vote. If any of the three providers had used all their shares to vote for the proposal, instead of failing with 45% of the vote, it would have passed with a majority, and Chevron would likely be emitting less methane (a potent greenhouse gas) into the atmosphere.
What can we do?
We are trying to solve this problem. The first step is to raise awareness of the issue, so please spread the word!
We'll be publishing articles for the next couple of months highlighting important findings in the data. To learn more about this project, be notified when we publish articles, or to get involved contact us, sign up for our email newsletter, or follow us on Twitter.