Not In My Backyard: Personal Bias in Mutual Fund Voting on Environmental and Social Proposals

Abstract

Fund managers cast votes that are more critical of firm environmental and social (ES) practices when the firm has operations located close to fund headquarters. This elevated support for shareholder ES proposals is not mirrored in governance proposals, which likely have less impact on the local community. We find similar pro-ES fund voting practices at firms with operations near the fund manager’s college, and in utility companies that provide electric and gas service to the fund’s address. We conclude that fund managers exhibit a personal bias in ES voting, being more likely to support ES proposals that impact them personally.

Keywords: Environmental and Social Proposals, Home Bias, Proxy Voting, Mutual Funds

JEL Classification: G23, G39, G41