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December 26, 2012
Top Sustainable Investment Stories of 2012, Part 1
by Robert Kropp
Assets allocated to sustainable investment continue to rise, with increasing amounts focusing on
positive screening strategies; however, mainstream mutual funds continue to lag in supporting
shareowner resolutions addressing climate change and corporate political spending.
By my count I will have logged 300 stories on SocialFunds.com during 2012. A leisurely scroll
through the headlines revealed for me a number of important and ongoing issues, which I will
highlight, but in no particular order. Several of the issues— hydraulic fracturing, regulatory
actions, and, of course, climate change—found their way onto the 2011 list of top stories as well,
demonstrating the incremental progress on these initiatives by sustainable investors and other
advocates for environmental and social justice.
US SIF Publishes Biennial Sustainable
Investment Trends Report
Assets allocated to sustainable investment strategies
continue to rise, as they have throughout the past decade, according to the 2012 Report on Sustainable and Responsible Investing
Trends in the US by US SIF: The Forum for
Sustainable and Responsible Investment. By the end of 2011, the report found, $3.74 trillion
were invested by means of such strategies as incorporation of environmental, social, and corporate
governance (ESG) criteria and shareowner engagement, representing a 22% increase over sustainable
investment at year end 2009.
Sustainable Investment Forums to
Produce Global Trends Report
In April, UK Sustainable Investment and Finance (UKSIF) announced that eight
sustainable investment organizations will collaborate for the first time on a report identifying
global trends in sustainable investment. The report, originally scheduled for release this month,
has not yet been published.
In a potentially important development for the transition to a
low-carbon economy and other issues relating to growing resource scarcity, US SIF also found that
while negative screening continues to be the predominant ESG incorporation strategy, "a larger
number of money managers also disclosed incorporating ESG issues in $812 billion in assets using
positive or inclusionary strategies or ESG integration."
FairPensions Calls on UK Ethical Funds
to Adopt Positive Screening and Increase Corporate Engagement
A survey by the UK-based
FairPensions clarified the importance of
positive screening by sustainable funds. Finding that most ethical funds in the UK continue to
focus on negative screening of so-called sin stocks as the basis of their investment strategies,
FairPensions stated, "Human rights and environmental protection now feature much more prominently
in most surveys of people's ethical priorities."
"Too much of the industry appears to be
characterized by the unthinking application of a traditional screening approach to an outdated set
of ethical priorities," the report found.
Mutual Funds Slow to Engage on
Proxy Voting on Climate Change by
Mutual Funds Fails to Account for Materiality
If sustainable funds are not allocating
enough to move the global economy toward sustainability, what then can be said about mainstream
mutual funds, which in the US account for almost $12 trillion in assets under management? One study
undertaken this year by Fund Votes suggests
that the proxy voting activities of most funds fail to account for the financial relevance of
climate change; in fact, the three largest mutual fund companies—American Funds, Fidelity, and
Vanguard, which manage a total of $1.6 trillion in US securities—did not vote in favor of a single
resolution addressing climate change in 2011.
Another study by Fund Votes found that "the
three largest mutual fund families in the United States failed to support a single political
spending disclosure resolution" in 2011. "Fidelity continues to abstain on all political spending
resolutions. Vanguard voted against five resolutions in the 2012 proxy season (abstaining on all
others), breaking a long record of abstentions. American opposed all 29 resolutions it voted on
during the 2012 proxy season."
Newtown Tragedy Galvanizes Debate on
One of 2011's top stories was the endorsement by the UN Human
Rights Council of Professor John Ruggies's Guiding Principles on Business and Human Rights, which recommended that corporate
responsibility should include addressing adverse impacts on communities of their activities. In the
wake of this month's tragedy in Newtown, CT, Robert Zevin of Zevin Asset Management stated, "Investors do have a role to play
in social change."
The response of Vanguard was not so enlightened. Mutual funds, a
spokesperson said, "Are not optimal agents to address social change."
action on corporate political spending expands to include lobbying activities, and Wal-mart is
alleged to have engaged in widespread bribery in Mexico.
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