better directors hired by Reuters

Author: Ross Kerber

(Reuters) – A Texas-based fund manager is not jumping on the bandwagon of supporting members of its shareholders who are calling on companies to take stronger action on climate change. Dimensional Fund Advisors says it would be more effective to replace corporate executives who don’t address the issue.

The Austin-based Dimensional sponsored a small portion of its climate-related shareholder resolutions followed by the Boston-based Ceres promotion team last year.

Company executives said measures that require contingencies ranging from emissions reports to extreme temperatures may or may not be relevant to investors, even if the measures are exceeded.

Although Dimensional wants boards to oversee environmental risks, “not all environmental issues are relevant to shareholders,” Jim Whittington, head of responsible investment at Dimensional, said in a recent interview.

Dimensional, meanwhile, has voted more often than its rivals against corporate executives, though it’s unclear how many of those votes stemmed from environmental issues.

Whittington said corporate directors are the ones best suited to judge the company’s exposure to climate risk.

“Our overall philosophy is that we are trying to protect and improve shareholder value,” Whittington added. For some businesses, steps to tackle or adapt to climate change may certainly make sense, he said.

In 2021 Dimensional approved only two of the 49 shareholder resolutions related to the climate followed by Ceres, at the same level as 2020 and the lowest support rate among the 58 major asset managers.

The average vote on resolutions rose to 41% in 2021 from 31% in 2020 to 31% in 2020, Ceres found, as giant asset managers BlackRock Inc (NYSE 🙂 and Vanguard Group increased their support.

Ceres said Dimensional is at risk of losing assets as investors put more money into funds focused on environmental, social and government (ESG) issues. Dimensional has had its fund outflows across the company, although analysts have cited other factors. However, Dimensional’s ESG funds have had a large influx.

Many climate activists are blowing up Dimensional’s view on voting, saying the resolutions could push companies to take faster action.

“The dimension must address the severity of the systemic risk posed by climate change,” said Rob Berridge, CEO of Ceres’s shareholder commitment.

Pioneer in STRATEGY

With $ 710 billion in assets, Dimensional has developed a reputation on Wall Street as an effective pioneer in quantitative strategies and value investments. There is a strong opposition to climate change resolutions, as the asset management industry focuses on ESG issues.

The Austin-based company made $ 10.3 billion in the first 11 months of 2021 and $ 37.7 billion in 2020 as a whole, according to Morningstar Direct.

Last year, Dimensional said U.S. sustainable sustainability funds, which supported further climate resolutions followed by Ceres, had net deposits of about $ 2 trillion.

Morningstar analyst Daniel Sotiroff said the outlook is likely to be a focus on investment in smaller firms and that investors were looking for profits in large-cap companies such as Tesla (NASDAQ 🙂 Inc. and Amazon.com Inc. (NASDAQ :).

Dimensional’s ESG approach “is in line with its home philosophy,” Sotiroff said with sufficient disclosure that effective markets will be priced at the risk of companies.

When dimensional people vote against climate-related resolutions, it is often a minority. Last May, he voted against a proposal by ConocoPhillips (NYSE 🙂 to disclose carbon emissions called “Scope 3”, which was caused by consumers burning fuel. The resolution was approved with 59% support.

Kristin Drake, head of investment management at Dimension, said in an interview that the oil and gas exploration and production company has little control over how its fuels are used. “It would be very difficult for them to be able to calculate their Scope 3 emissions,” he said.

A Conoco representative declined to comment on the Dimensional vote or whether he could set a Scope 3 goal.

in the case of Monster Drink Corp. (NASDAQ :), Dimensional gave a review of the day. The company voted in June against a proposal to offer investors a “climate” vote every year to the soft drink giant. Drake said the idea would isolate the boards from responsibility. He only won 7% support from Monster.

“If shareholders aren’t happy, they should vote against the directors,” Drake said.

A Monster spokesman declined to comment.

LESS DIRECTORS

Dimensional has received less support from board executives than other senior asset managers. He voted in favor of company-appointed directors in 2021 at US shareholders ’meetings only 86% of the time, compared to an average of 91% of its size and larger investors, according to research firm Insightia.

Insightia also found that about 8% of Dimensional’s critical board votes were against directors who served on board committees that oversaw the environment or similar issues.

With so few companies having such a committee, the findings suggest that when Dimensional saw environmental concerns it was ready to vote against the directors, said Doug Chia, chairman of the Soundboard Governance advisory firm.

Dimensional has not given its critical council votes on the frequency with which it was linked to climate change.

“We vote against administrators in our view for reasons that could result in poor oversight of E&G risk (environmental and social) due to poor oversight, lack of independence, poor attendance, and acting on a large number of boards,” Drake said.

Dimensional backed two of the three dissident directors who won seats Exxon Mobil (NYSE 🙂 last May, Motor No. 1 chose to support the hedge fund candidates who argued that major oil was not enough to deal with climate change.

In addition, on April 9, Dimensional voted against the re-election of its chairman of its sustainability committee, Rio Tinto (NYSE 🙂 Plc. An email sent to Reuters Dimensional said the vote was “due to Rio Tinto’s ongoing concern to monitor material environmental and social risks.”

The candidate, Megan Clark, received 74% of the vote, the lowest of any director.

A Rio Tinto spokesman declined to comment on Dimensional’s vote.