Putting the 'Mutual' Back in Mutual Funds

As legislation on climate change languishes in Congress, some are targeting the business community for action on emissions. The U.S. mutual fund industry controls total assets of $12.3 trillion (U.S. GDP = $13.8 trillion). Domain over that scale of corporate scratch could make a big difference in the American carbon footprint if it were used to sway companies to cut their emissions.

Ceres, a national group working to integrate sustainability principles into capital markets, has just released a report on the state of shareholder climate resolutions among mutual funds. Resolutions often ask companies to disclose their emissions and create plans for reducing them. The group says that after years of turning a deaf ear to these proposals, the industry may be starting to listen. This is good news on the heels of a February plea by managers of some of the world's largest funds to federal agencies asking them to take action on climate change.

But don't break the rose-colored glasses out of the basement yet. Whereas in 2004, opposition was 78% it is now down to 65%. Previously, the common response to a shareholder climate resolution was outright opposition. Today, firms tend to just stay out of it through abstention. At the same time, says Ceres, many funds offer special climate-friendly investments, but do nothing to change overall business practices.

Ceres points out that firms are beginning to see the risks of global warming in the same way they evaluate other market dangers. "More mutual fund firms are waking up to the broad financial realities of climate change, but very few are integrating this awareness across all of their business activities, including proxy voting policies," said Mindy S. Lubber, president of Ceres and director of the Investor Network on Climate Risk. "Investors should be scrubbing their portfolios for climate risks just as they're now scrubbing them for hidden sub-prime risks."

However, the report does heap praise on Goldman Sachs for openly supporting these carbon-counting resolutions while promoting climate-related investments as well.

In response to the report, eco-biz nonprofit group Co-op America is asking Americans to pressure the 10 worst big money offenders, saying "It's not just the right thing to do; it's good business."