Climate Investing

12Delegated Philanthropy in Mutual Fund Votes on Climate Change Externalities

This chapter studies the votes of institutional investors on shareholder resolutions instructing corporations to mitigate climate change externalities. Our sample includes 238 US fund families that voted on 14,409 different shareholder resolutions at 2,700 companies over the period from 2013 to 2016. We find that, in line with the delegated philanthropy logic, fund families that have larger proportions of responsible investments display a larger support for resolutions on climate change. This result holds (i) especially for fund families with a large percentage of SRI, (ii) whether ISS favors or not these resolutions, (iii) when these resolutions end up being close call votes and (iv) when we focus only on fund families that have voted more than 50 or 100 resolutions on environmental and social issues.

12.1. Introduction

One of the most important negative externalities produced by corporations is greenhouse gas emissions that constitute one of the main sources of global warming (Intergovernmental Panel on Climate Change 2022): the cost of pollution of such emissions is not fully reflected into market prices and taxes and is thus borne in part by society at large. According to a report by Trucost, a leading extra-financial analysis firm, environmental externalities alone represented, in 2008, 7% of revenues for the major 3,000 companies over the world (see Mattison et al. 2011). According to the Stern ...