Tuesday, June 17, 2014

SRI fundcos take active ownership role

Mutual funds with a responsible investment mandate are taking an active ownership role, opposing management resolutions far more often than non-RI fund groups, and supporting ESG shareholder resolutions. That’s the conclusion of the Canadian Mutual Fund Proxy Voting Survey, released this week by the Responsible Investment Association

The survey covers the 2013 proxy voting season, examining the voting patterns of 25 Canadian mutual fund families.

The three SRI-branded fund families (NEI, Meritas and Inhance) voted against compensation-related (say on pay) resolutions put forward by management 92% of the time at Canadian companies and 97% at U.S. companies, compared to 13% at both Canadian and U.S. companies by their mainstream counterparts.

On resolutions concerning executive stock incentive compensation plans, the RI funds voted against management 84% of the time, as opposed to 26% of the time by mainstream funds.

The RI fund groups were also more likely to support climate-related shareholder resolutions, voting in their favour 92% of the time versus 39% by non-RI fund groups.

"Voting against management recommendations is of course not limited to the RI funds -- a number of the non-RI fund groups surveyed supported multiple ESG issues and appear to be ready to take a long-term view," the study says.

Along with NEI, Meritas and Inhance, Desjardins, PH&N and CIBC were highlighted as  being the most critical of the status quo and most vigilant with their proxy voting.

Overall, the survey found that Canadian mutual funds side with management on the vast majority of resolutions brought to vote at TSX companies -- around 95% of the time, in most cases. In contrast, the three RI-branded funds voted with management on their resolutions only 56% of the time, and virtually none of the time in the case of "say on pay" resolutions.

"Not all mutual funds accept the status quo," the study concludes. "There are a handful of fund families, specifically those with an orientation towards responsible investment, who take a more active stance in challenging management recommendations. They tend to oppose more management-sponsored resolutions and support more ESG-related shareholder resolutions than their mainstream counterparts."


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