Mutual Funds’ Strategic Voting on Environmental and Social Issues

97 Pages Posted: 14 Jul 2021 Last revised: 4 Mar 2024

See all articles by Roni Michaely

Roni Michaely

The University of Hong Kong; ECGI

Guillem Ordonez-Calafi

University of Bristol

Silvina Rubio

University of Bristol Business School

Date Written: March 1, 2024

Abstract

Environmental and social (ES) funds in non-ES families must balance incorporating the stakeholders' interests they advertise and maximizing shareholder value favored by their families. We find that these funds support ES proposals that are far from the majority threshold, while opposing them when their vote is more likely to be pivotal. This strategy results in a high average support for ES proposals, seemingly consistent with their fiduciary responsibilities, while opposing contested ES proposals. This greenwashing strategy is driven by ES funds in non-ES families who cater to institutional investors. Indeed, these funds experience lower inflows when providing low average support for ES proposals. This strategic voting is not exhibited in governance proposals, nor by ES funds in ES families or by non-ES funds in non-ES families, reinforcing the notion of strategic voting to accommodate family preferences while appearing to meet the fiduciaries responsibilities of the funds.

Keywords: responsible investment, strategic voting, mutual funds, fiduciary duty

JEL Classification: G11, G30, K22, M14

Suggested Citation

Michaely, Roni and Ordonez-Calafi, Guillem and Rubio, Silvina, Mutual Funds’ Strategic Voting on Environmental and Social Issues (March 1, 2024). European Corporate Governance Institute – Finance Working Paper No. 774/2021, Available at SSRN: https://ssrn.com/abstract=3884917 or http://dx.doi.org/10.2139/ssrn.3884917

Roni Michaely

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Guillem Ordonez-Calafi

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, Avon BS8 ITH
United Kingdom

Silvina Rubio (Contact Author)

University of Bristol Business School ( email )

Queen's Ave
Bristol, BS8 1SD
United Kingdom

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