Hostility from the mutual fund industry towards climate change related shareholder resolutions is receding, according to a major new report, but some high profile investment banks are continuing to block resolutions despite their vocal support for green issues.

Released yesterday, the report from environmental investor coalition Ceres claims that Morgan Stanley and State Street Global Advisors are particularly guilty of "inconsistent behaviour", having boosted their climate change related business activity at the same time as voting against resolutions demanding companies they hold stakes in disclose more information on their climate strategies.

The study found that Morgan Stanley's mutual funds supported none of the 215 climate resolutions they faced between 2004 and 2007, while State Street Global Advisors' mutual funds opposed all 54 resolutions they faced over the same period.

The report claimed this "schizophrenic" behaviour is exposing the firms to financial and reputational risk and urged them to adopt "more sensible proxy voting policies on climate change".

Mindy S. Lubber, president of Ceres and director of the Investor Network on Climate Risk, said there was a strong business case for mutual funds to support shareholder resolutions demanding greater disclosure on climate change as it would help them identify climate related risks within their investor portfolio.

"Investors should be scrubbing their portfolios for climate risks just as they're now scrubbing them for hidden sub-prime risks," she said. "Mutual funds that are ignoring climate resolutions aimed at boosting corporate disclosure of climate risks are failing in their fiduciary responsibilities and failing their customers."

The report's study of almost 1,300 mutual funds found that overall they are softening their stance on climate related resolutions. Between 2004 and 2007 opposition to resolutions dropped from three quarters of fund votes to less than two out of three, while the number of abstention votes has more than doubled.

Goldman Sachs was singled out for praise after supporting 49 per cent of the shareholder resolutions faced by its mutual funds last year.

Lubber said investment firms should now look to integrate their growing awareness of climate related risks into their business activities, including their proxy voting policies.

The study comes just days after a report from the Institutional Investors Group on Climate Change, similarly concluded that investment firms should step up efforts to ensure rhetoric on climate change is being translated into changes to their investment processes and policies.