By Ross Kerber

(Reuters) – A Texas-based fund manger isn’t joining the ranks of peer support for shareholder resolutions calling on companies to do more about climate change. Dimensional Fund Advisors claims it would be better to simply replace corporate directors that fail to address this problem.

Only a small fraction of climate-related resolutions were supported by Dimensional, Austin.

Executives at the firm stated that the requirements for everything, including emissions reports and contingencies in extreme temperature cases, can prove to be ineffective or irrelevant to investors even if they pass.

Dimensional believes boards should be responsible for monitoring environmental risks. However, Jim Whittington from Dimensional, the head of responsible investments, stated that “not all issues of environmental concern are material to shareholders”.

Dimensional has been voting against corporate directors far more frequently than its rivals. However, it’s not clear how many of those votes were influenced by environmental concerns.

Whittington stated that corporate directors can best assess a company’s climate exposure.

Whittington said, “Our philosophy is to try and protect and improve shareholder value.” He said that some businesses may find it beneficial to take steps to adapt or counter climate change.

Dimensional was only able to support two of the 49 climate-related resolutions that Ceres had tracked in 2021. It is about the same level and lowest support rate among the top asset managers.

Ceres discovered that the average vote for resolutions increased to 41% by 2021, from 31% in 2020. This was due to large asset managers BlackRock Inc (NYSE 🙂 and Vanguard Group increasing their support.

Ceres stated that Dimensional could lose assets as more investors invest in funds that are focused on ESG matters. Analysts cite other reasons for the outflows Dimensional has experienced from its funds across the board. Dimensional’s ESG funds still have significant inflows.

Climate activists are critical of Dimensional’s voting system, arguing that resolutions could spur companies into faster action.

“Dimensional needs to face the gravity of the systemic risk created by climate change,” said Rob Berridge, Ceres’ senior director of shareholder engagement.

STATEGY PIONEER

Dimensional has a $710 million in assets and is known on Wall Street for being a leading pioneer of value-investing and quantitative strategies. Dimensional’s unconventional approach to climate change resolutions is notable, as the industry grows more interested in ESG issues.

Morningstar Direct reported that net withdrawals from Austin were $10.3 billion in the first 11 months 2021 and $37.7 trillion for the entire 2020 period.

For last year, Dimensional said its specialized U.S. sustainability-focused funds, which supported more of the climate resolutions tracked by Ceres, had net deposits of about $2 billion.

Daniel Sotiroff from Morningstar said outflows are likely to be due to the company’s investment focus on smaller businesses at a time when investors were chasing returns in large capitalization companies like Amazon.com Inc (NASDAQ): and Tesla (NASDAQ):.

Sotiroff stated that Dimensional’s ESG approach to Dimensional “fits into its house philosophy” and will ensure efficient markets price in risks faced by companies with enough disclosures.

Dimensional is usually in the minority when it votes against climate-related resolutions. It voted against ConocoPhillips’ (NYSE:) proposal to reveal so-called “Scope 3” carbon emissions that are created by consumers using its fuel. It passed the resolution with 59% of support.

Kristin Drake from Dimensional, the head of investment management, stated that they have little control over their fuels. It would be very difficult for them even to calculate Scope 3 emissions, she stated.

Conoco representatives declined to comment about Dimensional voting and whether they might be setting a Scope 3 goal.

If the following applies to you: Monster Beverage Dimensional’s opinions won the day for Corp (NASDAQ) In June, the firm opposed a suggestion by Soft Drinks giant to give investors an annual “say on climate” vote. Drake claimed that the proposal would protect boards from any accountability. Monster only gave it 7% of its support.

Drake stated, “If shareholders feel unhappy they should vote against directors.”

Monster representatives declined to comment.

BACKING DIRECTORS LESS

However, Dimensional is not as supportive of directors on the board than major asset managers. According to Insightia, it voted for company-nominated directors only 86% of all U.S. shareholder meeting votes in 2021. This compares to 91% average among investors its size or larger.

Insightia discovered that approximately 8% of Dimensional’s board vote rejections were for directors who were members of boards responsible for environmental or similar concerns.

Because few companies have these committees, this finding indicates that Dimensional was willing vote against directors when it perceived environmental concerns. Doug Chia, President of Soundboard Governance, stated, “Dimensional”

Dimensional failed to provide details on the frequency of climate change-related board vote.

“We vote against directors for reasons that we think are likely to contribute to insufficient oversight of E&S (environmental and social) risk such as a lack of independence, poor attendance, and serving on an excessive number of boards,” Drake said.

Dimensional sponsored two of the three dissident directors who were elected to seats Exxon Mobil (NYSE:) Last May, the company chose to back nominees from Engine No. 1 hedge fund. 1. This argument argued that the oil major wasn’t doing enough to combat climate change.

Dimensional also voted against a Rio Tinto Plc (NYSE:PLC) director, who is the chairman of its sustainability board committee. In an e-mail to Reuters Dimensional said the vote was due to “ongoing concerns about Rio Tinto’s oversight of material environmental and social risks.”

Megan Clark was the nominee and won 74%, which is the lowest percentage of directors.

Rio Tinto spokespersons declined to comment about Dimensional votes.