(Updates with comment from APG.)
PGGM, the €162bn Dutch pension investment giant, has backed an effort to hold US mutual fund company Franklin Templeton Investments (FTI) accountable for an alleged discrepancy between FTI’s claim that climate change is a risk and FTI funds are ignoring that risk when voting at investee firms.
The effort was spearheaded by Zevin Asset Management, a Boston-based socially responsible investment (SRI) firm. Prior to the annual general meeting (AGM) of FTI’s parent firm, Franklin Resources, Zevin got a proposal on the agenda that would have asked the firm report to shareholders on the alleged discrepancy.
While FTI says consideration of climate change factors “gives us a competitive advantage by managing risk and opportunities,” Zevin says research done for the sustainability advocacy group Ceres shows that FTI’s voting record on climate change is “near the bottom of the pack among mutual funds.” This was the basis for Zevin’s shareholder proposal at the meeting, held on February 17.
PGGM voted in favour of Zevin’s proposal, saying that the “report would benefit shareholders by allowing them to assess the company’s policies and proxy voting practices on climate change-related issues.” But Zevin’s proposal garnered just 4.5% shareholder support.
This was due in large part to influential proxy advisors ISS and Glass Lewis failing to endorse the proposal.APG of the Netherlands, CalSTRS, Florida’s State Board of Administration (SBA) and Norges Bank Investment Management (NBIM) were among those who voted it down.
A spokesperson for APG told RI: We support the general objections to this specific resolution, that the proposal could impose undue influence on the Investment Manager’s decision-making by Franklin Resources’ board of directors. Furthermore, it is widely recognized that the Investment Manager does integrate ESG risks into the investment process.
“For APG it is very important that the external asset managers who manage mandates for us, including Franklin Templeton, abide by our ESG-policy. In ensuring this, we favour our direct contact with them above the suggestions that were part of this resolution.”
Zevin’s President Sonia Kowal said: “It is symptomatic of a first- year vote on a somewhat unusual topic. I continue to believe that Franklin’s inconsistency on climate issues poses a reputational risk to the firm, especially when contrasted with many of its competitors.”
According to Zevin, FTI competitors that have been supported climate change resolutions at US firms include Deutsche Bank’s asset management unit, Oppenheimer and AllianceBernstein. Kowal promises to re-file the proposal at FTI’s parent firm in 2017 and has filed a similar motion at T. Rowe Price for the current proxy season.