Mutual fund pollution experience and environmental voting

Abstract

We study the relationship between mutual fund management's direct experience with extreme environment events and the fund's voting behavior on environmental issues. We find that higher air pollution in a fund's home county increases its propensity to vote in support of shareholders' environmental proposals. The effect is weakened by fund manager turnovers, and managers' affiliation with the Republican Party. Conversely, the effect is stronger for more highly contested environmental proposals. Overall, our results suggest that mutual fund management's direct experience with extreme environment events plays a significant role in motivating the fund's environmental engagements.

Keywords: mutual fund voting, environment, air pollution