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Investigating Proxy Voting Data and Fund Accountability

Exercise Guide

Morningstar Direct March 2021© 2021 Morningstar. All Rights Reserved.

Copyright © 2021 Morningstar, Inc. All rights reserved.

The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and (4) does not constitute advice of any kind. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Any statements that are nonfactual in nature constitute opinions only, are subject to change without notice, and may not be consistent across Morningstar. Past performance is no guarantee of future results.

Contents

Morningstar Direct March 2021 3© 2021 Morningstar. All Rights Reserved.

Contents

Finding Sustainability Research from Morningstar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Exercise 1: Explore the Research Portal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Exercise 2: View the Sustainable Funds US Landscape Q4 2020 list . . . . . . . . . . . . . . . . 7

Investigating the Sustainable Funds US Landscape Q4 2020 list. . . . . . . . . . . . . . . . . . . . . . . . 8

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Exercise 3: View Proxy Voting Aggregate data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Exercise 4: Create a Performance Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Exercise 5: Change the settings for the group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Conducting Additional Proxy Level Aggregate Data Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . 16

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Exercise 6: Read an article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Exercise 7: Edit a Performance Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Exercise 8: Apply Conditional Formatting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Creating a Presentation Studio Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Exercise 9: Create a presentation studio report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20


Investigating Proxy Voting Data and Fund Accountability

Proxy Voting Aggregate data helps users understand how funds vote in comparison to other funds and allows users to correlate fund-level proxy voting with fund sustainability ratings. The data also does the following:

g Illuminates ESG practices and reveals how investment fiduciaries are stewarding their investmentsgProvides transparency into what funds are doing to influence governance practicesgProtects against environmental and social risks, andgPromotes sustainable business practices.

See the detailed FAQ for more information on Fund Proxy Voting Aggregate data.

This exercise guide shows users how to use Morningstar DirectSM to find research from Morningstar on the topic of proxy voting, discover intentionally sustainable funds, and analyze the Proxy Voting aggregate data for these funds. Learning about this content and capabilities offers a unique and insightful perspective when it comes to reviewing sustainable funds.

This exercise guide covers the following topics:

g Finding Sustainability Research from Morningstar (page 5)g Investigating the Sustainable Funds US Landscape Q4 2020 list (page 7)gConducting Additional Proxy-Level Aggregate Data Analysis (page 15)gCreating a Presentation Studio Report (page 19)

Morningstar Direct offers company-level ESG data for investors in a number of areas.

https://morningstardirect.morningstar.com/clientcomm/FundProxyDataFAQs.pdf

Finding Sustainability Research from Morningstar Overview


Finding Sustainability Research from Morningstar

OverviewKimberly works at an asset management firm and is doing a competitive analysis on the U.S. sustainable funds landscape. This analysis will give her the insight necessary to market a sustainable fund from her firm with an environmental focus. She recently read in the Morningstar Direct release notes about new Proxy Voting data points, which allow users to correlate fund-level proxy voting with fund sustainability ratings. The data also provides transparency into what funds are doing to protect against environmental risks.

This section shows users how to use Morningstar DirectSM to find research about proxy votes. Users will filter the Open-End Fund and Exchange-Traded Fund universes for sustainable funds focused on environmental impact. Next, users will investigate the Proxy Voting Aggregate and sustainability data for these funds and select a fund to market.

The following exercise shows users how to find an article from Morningstar related to this topic, as well as how to follow specific topics in the Research section of Morningstar Direct.

Exercise 1: Explore the Research Portal

What is the value of fund-level proxy data, and what does it tell us about managers' approach to sustainability? This exercise shows users how to find research on the topic from Morningstar Analysts. To explore Morningstar Research, do the following:

1. Log into the desktop version of Morningstar Direct. The desktop version of Morningstar Direct opens.

2. From the Research Portal section in the Home module, click Launch. The Research Portal opens in a browser window.

Click Launch.

Finding Sustainability Research from Morningstar Exercise 2: View the Sustainable Funds US Landscape Q4 2020 list


3. In the search field, type fund proxy, then select the Sustainable Fund Proxy Votes Show a Range of Support for ESG Measures article under the Morningstar Research heading. The article opens.

4. Read the article.

Note: To easily find this article for re-reading or sharing with others, click the Bookmark icon in the top-right corner of the article.

Exercise 2: View the Sustainable Funds US Landscape Q4 2020 list

The article analyzed sustainable funds’ level of support for key ESG issues through proxy voting. Morningstar created a list of sustainable funds, which is available to all Morningstar Direct users. The funds in this list will be used in the proxy-level data analysis. To view the Sustainable Funds US Landscape Q4 2020 list, do the following:

1. Open the desktop version of Morningstar Direct.

2. Click the Workspace module. The Workspace module opens on the My Lists page.

3. Double-click the Sustainable Landscape U.S. Funds Q4 2020 list. The list opens in the grid.

Users can include terms in the body of an article or in the title and the search feature will find the best match.

Click this grid.

Investigating the Sustainable Funds US Landscape Q4 2020 list Overview


Investigating the Sustainable Funds US Landscape Q4 2020 list

OverviewThe previous exercise showed users how to view the Sustainable Funds US Landscape Q4 2020 list. The next step is to investigate the Proxy Voting Aggregate data for these funds in the following exercises:

gView Proxy Voting Aggregate data on page 7gCreate a custom data set on page 13

Exercise 3: View Proxy Voting Aggregate data

To view the Proxy Voting Aggregate data, do the following:

1. From the View drop-down, select Proxy Data: Top Level (Fund).

Note: The columns display the percentage of support for shareholder/management resolutions, percentage against shareholder/management resolutions, and the number of votes counted for shareholder/management resolutions.

2. From the View drop-down, select Proxy Data: Shareholder Resolutions (Fund).

3. Double-click the % Support - Environment column to sort by descending order.

Select the Proxy Data: Top Level (Fund) data set.

Select the Proxy Data: Shareholder Resolutions (Fund) data set.

Investigating the Sustainable Funds US Landscape Q4 2020 list Exercise 4: Create a Performance Report


Exercise 4: Create a Performance Report

In the previous exercise, users viewed the Proxy Voting Aggregate data. In this exercise, users will create a performance report to further investigate the Proxy Voting Aggregate data for the Sustainable Funds US Landscape Q4 2020 list.

To create a performance report, do the following:

1. Click the Performance Reporting module. The module opens.

Note: If you are asked whether you want to save your changes in Workspace, click No.

2. From the toolbar, click New. The Select Investments window opens.

3. Select the Multiple Investments option.

4. Click OK. The Find Investments window opens.

5. Click My Lists.

6. From the drop-down, select the Sustainable Funds US Landscape Q4 2020 list.

Click this module.

Select Multiple Investments.

Investigating the Sustainable Funds US Landscape Q4 2020 list Exercise 4: Create a Performance Report


7. Click Go. The funds are added to the Available Records section.

8. Click Add All. The funds are added to the Selected Records section.

9. Click OK. The Group Settings window opens.

Select Multiple Investments.

Investigating the Sustainable Funds US Landscape Q4 2020 list Exercise 5: Change the settings for the group


Exercise 5: Change the settings for the group

By default, when examining the performance of selected funds in a performance report, Morningstar Direct groups funds by Morningstar Category. In this section, users will learn how to change the grouping to Firm Name instead of Morningstar Category.

To change the settings for a performance report, do the following:

1. In the Group Settings window, from the Group By options select Search.

2. From the Find Data Point By options, select Name containing.

3. Search for firm, then click Go. The Available Grouping will default to Firm Name.

4. Click Update.

5. A dialog box appears, asking if you want to continue. Click OK. The Group Settings window refreshes.

6. From the toolbar, click Report Settings.

Click Update.



7. In the Group Display Settings area, uncheck Show display benchmark 1 and Show display benchmark 2.

Note: The report will not include performance criteria, therefore benchmarks do not need to be displayed.

8. In the Summary Statistics sections, check Average and Sum.

9. Click OK. The Report Settings window closes.

10. Click OK. The Select Column window opens.

11. User Defined should be selected by default. Click OK. The Performance Column Setup window opens.

12. Click OK. The Supplementary Columns window opens.

Note the highlighted areas.



13. From the View drop-down, select Proxy Data: Top Level (Fund).

14. Use <CTRL> + click to select the following data points:

15. Click Add. The data points are added to the Selected Supplementary Columns area

gName

gProxy Year

g% Support All Shareholder Resolutions

g% Against All Shareholder Resolutions

g% Abstained All Shareholder Resolutions

Select this view.



16. Click OK. The performance report opens.

17. From the toolbar, click Calculate to display the data.

18. The Save Report window opens. Name the report Proxy Level Data, then click OK. The report calculates.

19. The Report Calculation Complete dialog box appears. Click Yes to view the report.

20. Scroll down to view the Calvert Research and Management funds.


Click Yes.



21. Click the arrow next to Peer Group Summary Statistics to view the statistics.

Which funds supported All Shareholder Resolutions?

Which funds voted against All Shareholder Resolutions?

Conducting Additional Proxy-Level Aggregate Data Analysis Overview


Conducting Additional Proxy-Level Aggregate Data Analysis

OverviewIt is worthwhile to do some additional Proxy-Level Aggregate Data analysis on the Sustainable Funds US Landscape Q4 2020 list. Before conducting additional analysis, the following exercise shows users how to find another article with insights about the importance of proxy voting data.

Exercise 6: Read an article

To learn more about proxy voting data, do the following:

1. Click the Home module. The Home page opens.

2. From the Research Portal section, click Launch. The Research Portal opens in a browser window.

3. In the search field, type proxy, then select the Which Fund Companies Supported Climate Via Proxy Votes? article under the Morningstar Research heading. The article opens.

4. Read the article.

Click Launch.

Users can include terms in the body of an article or in the title and the search feature will find the best match.

Conducting Additional Proxy-Level Aggregate Data Analysis Exercise 7: Edit a Performance Report


Exercise 7: Edit a Performance Report

The article users read in the previous exercise said investors are focused now more than ever on the long-term risks climate change poses. Shareholder resolutions give investors a voice on climate change and environmental issues.

To add shareholder resolutions data to the performance report, do the following:

1. Open the desktop version of Morningstar Direct.

2. Click the Performance Reporting module. The Folders page opens.

3. Double-click the Proxy Level Data performance report. The report opens.

4. From the toolbar, click Edit > Supplementary. The Supplementary Columns window opens.

5. From the View drop-down, select Proxy Data: Shareholder Resolutions.


7. Click Add. The data points are added to the Selected Supplementary Columns area.

8. From the View drop-down, select Intentional Attributes: Sustainable Investments.


10. Click Add. The data points are added to the Selected Supplementary Columns area.

11. Click OK. Columns are added to the performance report.

12. From the toolbar, click Calculate.

g% Support Climate Change

g% Support - Environment

g% Against - Climate Change

g% Against Environment

gVotes Counted - Climate Change

gVotes Counted - Environment

gSustainable Investment: ESG Fund Overall

gSustainable Investment: Environmental

Select Supplementary.

Conducting Additional Proxy-Level Aggregate Data Analysis Exercise 8: Apply Conditional Formatting


13. The Report Calculation Complete window appears. Click Yes.

14. Scroll down to view the funds.

15. Answer the following questions:

Exercise 8: Apply Conditional Formatting

Conditional Formatting can be applied to a Performance Report which calls out specific criteria. In this exercise, users will call out the sustainable investments that support the environment and the ones that do not support the environment. To apply conditional formatting, do the following:

1. From the toolbar, click Tools > Conditional Format > Conditional Formatting.

2. From the Field Name drop-down, select Sustainable Investment - Environmental. The Operator defaults to =.

Click Yes.

Which funds supported environmental resolutions?

Which funds supported climate change resolutions?

Based on this data, which funds are marketable?


Conducting Additional Proxy-Level Aggregate Data Analysis Exercise 8: Apply Conditional Formatting


3. From the Value field, select Yes.

4. Check Column Only.

5. Click the Cell Color drop-down and select green.

6. Click Add Rule.

7. From the Field Name drop-down, select % Support - Environment.

8. From the Operator field, select <.

9. In the Value field, enter 50.

10. Check Column Only.

11. Click the Cell Color drop-down and select red.

12. Click OK. Conditional formatting is applied to the performance report.

13. Scroll down to view the funds. Are there any intentionally environmental funds that voted less than 50% in support of the environment?

Note the values.


Creating a Presentation Studio Report Overview


Creating a Presentation Studio Report

OverviewNow that a sustainable fund has been chosen to market, the next step is to create a report using Presentation Studio.

Exercise 9: Create a presentation studio report

Users can create a presentation studio report by using a template. To create the report, do the following:

1. Click the Presentation Studio module. Presentation Studio opens in a separate window.

2. Click Morningstar Templates.

3. Expand the Factsheets section.

4. Scroll down and double-click the Morningstar Sustainability Manager Research template. The Investments: Settings window opens.

5. Click the magnifying glass next to Name. The Find Investment window opens.

Select this template.

Click this icon.

Creating a Presentation Studio Report Exercise 9: Create a presentation studio report


6. Enter the name of the Calvert fund, then click OK. The factsheet opens in a new window.

7. Click the section in the header containing the text Morningstar Sustainability Manager Research and change it to your firm’s name.

8. Click the Over/Under Benchmark Performance component.

9. From the toolbar, click the Divide Page icon.

Click OK after selecting the fund.

Change the text in this section to your firm’s name.



10. Under Two Cell, select the first option.

11. From the toolbar, click Home > Table > Snapshot.

12. Drag-and-drop the Single Investment Snapshot component to the right of the Over/Under Benchmark Performance chart.

13. From the Single Investment Snapshot table, click the first drop-down.

14. From the Find By drop-down, select Proxy Data: Shareholder Resolutions (Fund).

15. Select % Support - Climate Change.

Select this option.

Select Single Investment Snapshot.



16. Click Add. The table updates.

17. Repeat steps 13-14 for the second drop-down.

18. Select % Support - Environment.


20. From the Single Investment Snapshot table, click the third drop-down.

21. From the Find By drop-down, select Proxy Data: Top Level (Fund).

22. Select % Support All Shareholder Resolutions.


24. Repeat steps 20-21 for the fourth drop-down.

25. Select Votes Counted - All Shareholder Resolutions.

Select % Support Climate Change.




Note the updated data points.



27. Right-click the Global Broad Category Group section, then select Delete Row. The row is removed.

28. Click the settings icon on the top left and click Save As.

29. Name the report Proxy Level Data.

30. Click the settings icon on the top left and click Save As Template.

31. Name the template Proxy Level Data.

Delete the row.

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