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Type Bachelor's Thesis
Scope Discipline-based scholarship
Title The Voting Behavior of Sustainable Mutual Funds
Organization Unit
Authors
  • Nina Cantoni
Supervisors
  • Nils Jonathan Krakow
  • Marc Chesney
Language
  • English
Institution University of Zurich
Faculty Faculty of Business, Economics and Informatics
Date 2020
Abstract Text To understand how sustainable mutual funds vote at the annual general meetings of the firms in their portfolio, all voting decisions for 50 ESG mutual funds for the years 2006 to 2019 are gathered and analyzed. The aim of this paper is to assess if sustainable mutual funds fulfill their fiduciary duty towards their clients and vote in an independent and active manner. To approach for active ownership in voting, the opposition rate towards the management is observed. Further, determinants on the proposal- and on the fund-level are examined, to detect if they encourage or inhibit an active voting behavior. It is shown that none of the funds blindly trusts the managements’ recommendations. The funds seem to vote strategically and in a responsible way. The most pronounced determinant for the voting decision is the sponsor of a proposal. The funds oppose the management significantly more often on shareholder proposals than they do on management proposals. A second determinant is the content of the proposal, but with a smaller effect on the voting outcome. The observed fund characteristics show no significant impact. Neither a fund’s turnover nor the extent to which it integrates ESG criteria into its investment process seem to affect their voting decision. However, there is evidence for a time persistent heterogeneity between the funds, hinting at other fund-level factors that have an impact on voting. On average, ESG mutual funds vote in favor of proposals, independent of the sponsor and the topic. Over the years the overall support slightly increased. This suggests that the proposals more and more reflect the preferences of the ESG funds, mirroring the growing demand for sustainable practices in the whole financial sector. This paper is amongst the first to address the voting behavior of sustainable mutual funds. The consideration of shareholder sponsored director elections represents another novel approach.
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