Published by Ignites.

By Peter Ortiz August 24, 2015

In an ongoing battle to rid anti-genocide shareholder proposals from its proxy ballots, Fidelity has successfully knocked the question off of votes for three funds that collectively represent $23 billion in assets.

Last week, the Securities and Exchange Commission said Fidelity could exclude the question about whether the funds should adopt policies precluding investments in companies that “substantially contribute to genocide or crimes against humanity,” after the firm proved that the fund investors that lobbied for the question no longer held the funds.

Fidelity in April wrote to the investors responsible for demanding that the question be posed to shareholders of the $12.8 billion Freedom 2020, $9.2 billion Freedom 2025 and $992 million Advisor Municipal Income funds for a Nov. 18 shareholder meeting. The three investors related to those funds first asked Fidelity to add the question in 2010.

But the Boston-based fund giant still must contend with the Investors Against Genocide campaign on several other products. The president of the group expects at least three more funds to pose the question at a November vote: Fidelity Advisor Mortgage Securities, GNMA and Intermediate Government Income. Proxy materials for those products have not yet been issued.

Since a fund is not required to hold a proxy meeting every year, four or five years can pass from the time a shareholder has filed a proposal and a meeting is called.

To successfully land a question on fund proxies, shareholders must pass several procedural requirements, including having held at least $2,000 or 1% of shares eligible to vote (whichever is smaller) continuously for at least one year before the proposal is presented to other investors.

Fidelity cited the same rule in 2013 in order to omit an anti-genocide proposal for two other funds, but the proposal still made it onto six other funds that went to a shareholder vote in May of that year. Those proposals failed to win enough votes in favor.

Investors Against Genocide began targeting several fund companies that it said invested in companies with significant operations in Sudan, such as: PetroChina/CNPC and China Petroleum & Chemical Corporation/Sinopec, both Chinese companies; India’s Oil and Natural Gas Corporation; and Malaysia’s Petronas.

The group first approached Fidelity in September 2006 and saw its first shareholder proposal vote in 2008, according to founder Eric Cohen.

Among the other fund shops to have faced shareholder proposals are Vanguard, JPMorgan, American Funds, Franklin and Voya. A series of television ads in 2007 attacked the mutual fund industry, while the Investors Against Genocide website called out Fidelity, Franklin and American Funds’ parent Capital Group, specifically.

Cohen’s group has cited success with are TIAA-Cref, American Funds and T. Rowe Price.

Fidelity has “included shareholder proposals for numerous Fidelity funds many times in the past and [has] also included the proposals in proxy materials for other funds that have held shareholder meetings this year,” writes company spokesman Adam Banker.

In May, Fidelity presented the anti-genocide proposal to shareholders of three funds. Cash Reserve realized the highest yes votes, 26.11%, while the Spartan U.S. Bond Index and Investment Grade Bond funds, garnered 22.95% and 14.06% yes votes, respectively, according to the Investors Against Genocide site.

The highest number of votes the proposal has ever garnered on a Fidelity fund was 31%. The lowest was 14% of votes. Fidelity has been “one of the most resistant of financial institutions and not receptive to our request to avoid companies that substantially contribute to genocide,” says Cohen.

In all cases where his group’s proposals have made it onto Fidelity proxies, the firm has recommended that shareholders vote no, Cohen notes. Since 2006, the firm has “actively opposed changing its policies to avoid investments tied to genocide,” according to Investors Against Genocide’s website. In addition to this year, the group managed to get its shareholder proposals onto Fidelity funds in 2008, 2009 and 2013.

Cohen contrasts Fidelity with other funds that have been more supportive of the group’s efforts, including most recently BlackRock and its CEO, Larry Fink, at a shareholder meeting in May.

Like Investors Against Genocide, “BlackRock is interested in promoting good governance and achieving positive advances in the ESG sector,” writes a spokesman at the firm in an e-mail response to questions. “We have devoted substantial resources to engaging on the ethical concerns of our clients and stockholders.”

In addition, the firm has built out its socially responsible product unit and earlier this year hired Deborah Winshel as global head of its impact investing efforts. Winshel was previously president of The Robin Hood Foundation.

BlackRock does not have any shareholder proposals pending. However, Cohen’s group has approached the shop on three areas: engaging index providers to reform some or all of their indices to avoid including companies tied to genocide; documenting a public policy on avoiding investments in companies tied to genocide in BlackRock’s actively managed funds; and providing prominent disclosure on BlackRock funds that include companies tied to genocide, he says.