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September 23, 2013

Mutual Fund Challenged over Proxy Voting on ESG Issues
    by Robert Kropp

Zevin Asset Management files a shareowner resolution at Franklin Resources, requesting that the mutual fund company report on proxy voting policies relating to environmental and social issues. -- The 2013 Proxy Season Roundup recently compiled by Jackie Cook of Fund Votes reveals that at least 40% of shareowners supported 14 environmental and social resolutions, and that the 21% overall vote in support of such resolutions this year represents a ten-year high.

SRI Mutual Funds GuideBut the primary focus of Fund Votes has been tracking the shareowner voting records of mutual fund companies, and its analysis of mutual fund proxy voting during the 2012 season found that “Six fund families failed to support even a single climate-related resolution in 2012, including BNY Mellon, Franklin Templeton, ING, Pioneer, Putnam and Vanguard.”

The parent company of Franklin Templeton is Franklin Resources. The company is a signatory to the United Nations' Principles for Responsible Investment (PRI), and reports annually on greenhouse gas (GHG) emissions to CDP as well.

“ESG issues, such as natural resource scarcity, hazardous waste disposal, climate change, product safety, employee health and safety practices, shareholder rights, and many others, can have a material effect on the performance of securities,” Franklin Resources reported to CDP this year. “The mission of Franklin Templeton’s ESG program is to partner with investment teams to enhance integration of ESG considerations in the investment process in order to manage risk and enhance returns.”

“This language seems very much at odds with the Company’s 2012 proxy voting record on climate change,” Sonia Kowal of Zevin Asset Management wrote in a letter to Franklin Resources. “When it comes to proxy voting, it appears that Franklin Resources’ practice contradicts its own statements that recognize the importance of ESG factors in contributing to long term business success.”

Zevin has filed a shareowner resolution with Franklin Resources which calls on the company to review its proxy voting policies, “taking into account Franklin Resources’ own corporate responsibility and environmental positions and the fiduciary and economic case for the shareholder resolutions presented.”

“To the best of our knowledge, Franklin Resources uniformly votes against all shareholder resolutions on social, environmental and climate change matters, backing management recommendations even when major proxy advisory services, such as ISS, support such resolutions with a clear, economic rationale,” the resolution states. “We are disappointed that Franklin Resources’ proxy voting record does not reflect the company’s own commitment to climate change, as well as other social and environmental factors with the potential to impact long term shareholder value.”

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