State Street funds ramp up support for climate-change measures

September 6, 2016 4:55 PM EDT

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By Ross Kerber

BOSTON (Reuters) - State Street Corp funds backed a majority of shareholder resolutions on climate-change issues this year, a swing from past proxy positions that a company executive said reflects a growing appreciation of environmental risks facing companies whose shares it owns.

State Street supported the resolutions 51 percent of the time at S&P 500 companies including Exxon Mobil Corp and Chevron Corp in this year's proxy season, up from 14 percent last year, according to a review of recent securities filings by research firm Fund Votes.

State Street's support level was more than twice that of other big asset managers. Rakhi Kumar, head of governance for State Street Global Advisors, the Boston company's asset-management arm, said the votes showed it becoming "more comfortable with understanding the risks in our portfolio."

One issue, she said, is that few corporate directors were able to talk about environmental matters in detail. With more environmental regulation likely, "They need to get more conversant with climate risk," she said in an interview on Tuesday.

Kumar said the voting record was not a radical change after years of raising the issue with corporate leaders, and she declined to discuss specific votes.

Still, State Street's growing support for climate-change measures could pressure rivals as activists scrutinize the fund industry.

For instance, leaders of the Asset Owners Disclosure Project, in London, said on Tuesday it was "hypocritical" of fund sponsors BlackRock Inc and Vanguard Group to say they consider environmental issues while voting against a high-profile proposal calling on Exxon to report on the impact climate change policies could have on its business.

Those votes helped Exxon defeat the measure at its annual meeting in May, where it was supported by 38 percent of votes cast. Recent filings showed that State Street funds backed the proposal. (Fund Votes' findings excluded some cases where firms split their votes.)

BlackRock and Vanguard say proxy votes are just one aspect of their engagement with corporations. In a separate report on Tuesday, BlackRock said all investors should factor climate change issues into their decision-making and that it is incorporating environmental changes into its analytical processes.

Vanguard spokeswoman Arianna Stefanoni Sherlock said the company is "firmly committed" to managing environmental issues as part of its prudent investment practices.

(The story was refiled to correct the day of the week in paragraph 4)

(Additional reporting by Dion Rabouin in New York. Editing by Steve Orlofsky)

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