Not in my backyard: Personal bias in mutual fund voting on environmental and social proposals

Fund managers cast votes that are more critical of firm environmental and social (ES) practices when the firm has operations located close to fund headquarters. This elevated support for shareholder ES proposals is not mirrored in governance proposals, which likely have less impact on the local community. We find similar pro-ES fund voting practices at firms with operations near the fund manager’s college and prior employment locations and in utility companies that provide electric and gas service to the fund’s address. Manager and sub-advisor turnover events provide additional evidence: tracking the same decision-maker’s votes at a fixed set of firms before and after the move, we find that support for ES proposals increases significantly once the manager gains proximity to those firms. The proximity effect is concentrated at high-polluting plants, consistent with managers responding to personal exposure to environmental harm. We conclude that fund managers exhibit a personal bias in ES voting, being more likely to support ES proposals that impact them personally.