Putting faith in Wall StreetLatest News Wednesday, July 13th, 2011
A UMNS Report
By Heather Hahn
The Book of Discipline requires that all church agencies and institutions, including hospitals and universities, “make a conscious effort” to invest in line with United Methodist Social Principles.
Part of the job at the denomination’s pension agency is to “do good” while still making good returns.
To that end, the United Methodist Board of Pension and Health Benefits recently launched Wespath Investment Management, a new brand name for its institutional investment services, which work to apply the church’s teachings to stock selections.
The investment program, named for John Wesley, helps annual (regional) conferences, conference foundations and other United Methodist-affiliated institutions with socially responsible investments.
The United Methodist Church, like many other religious organizations, long has participated in what the financial industry calls socially responsible investing. With about $17 billion in assets, the United Methodist pension program is the largest church pension fund in the United States and overall the country’s 80th largest. The denomination has some 74,000 participants in its pension and benefits programs.
Socially responsible investing can take three forms:
* screening out certain companies
* engaging in shareholder advocacy with others
* specifically investing in some financial projects such as affordable housing.
Staff members say the pension board in all its efforts keeps focus on its main goal: helping United Methodist clergy and staff members reap much more than they have sown.
“We want to work, invest and operate in alignment with church values,” said Barbara Boigegrain, the pension board’s top executive. “But, our primary role is to hold our fiduciary responsibilities foremost.”
The pension board is just one of many church-related groups tasked with socially responsible investing.
Various church institutions go about such investing in different ways, said Byrd L. Bonner, who chairs the denomination’s Socially Responsible Investment Task Force. Bonner is also the executive director of the United Methodist Church Foundation, which manages a number of endowments for church agencies and other general church initiatives.
Bonner’s task force last year conducted an online survey on the investment strategies of the church at large. The task force still is finalizing its report, but the survey did find that many church leaders do not know the church’s teachings regarding socially responsible investing.
“We as a church have not taught what the General Conference has decided,” Bonner said. “The challenge is not creating new materials. The challenge is: How do we get (materials) into the pews?”
How screening works
The Book of Discipline, the denomination’s law book, requires that all church agencies and institutions, including hospitals and universities, “make a conscious effort” to invest in line with United Methodist Social Principles.
The book specifically urges church institutions to “endeavor to avoid” businesses that engage in racial discrimination, violate human rights or use sweatshops or forced labor. The book also exhorts United Methodist entities to avoid investments that support gambling, pornography, alcoholic beverages, tobacco or the production of nuclear armaments.
United Methodist pension board and other church-related groups as a rule will not invest in a company that receives more than 10 percent of its revenue from the objectionable products.
This means screening out companies such as casinos, adult-movie channels, beer distributors, cigarette manufacturers and defense contractors. The pension board also stays clear of restaurant chains that receive a significant portion of their revenue from alcoholic beverages, said David Zellner, the board’s chief investment officer.
Church investment portfolios do include large retailers such as Costco, Wal-Mart and some grocery chains that receive only a small fraction of their revenue from selling alcohol or cigarettes, he said.
Over the years, the pension board has found its screening neither hurts nor helps its participants’ investment returns, Zellner said.
How shareholder advocacy works
When the pension board buys shares in a company, it often will join efforts to ensure that the company acts in an ethical manner.
Shareholder advocacy can include contacting corporate executives. It also takes the form of shareholder resolutions that can pressure a company to change its policies and practices in a certain way. An investor needs at least $2,000 worth of shares to draw up resolutions under Security and Exchange Commission rules.
Vidette Bullock Mixon, the pension board’s corporate relations director, said the board concentrates on five areas in its advocacy work.
In keeping with the 2008 Book of Resolutions, the board encourages companies to:
* Provide public reporting and transparency about their policies and practices
* Reduce risks to the environment
* Maintain human rights and fair-labor standards in their supply chains
* Include women and people of color on their boards of directors and limit executive compensation to what is sustainable
* Safeguard product safety and other health measures.
Bullock Mixon pointed to Wal-Mart as an example of company that has been responsive over the years to such advocacy. In collaboration with other socially responsible investors, the board persuaded Wal-Mart to establish a report on its environmental impact and long-term sustainability.
The board’s advocacy isn’t just about getting corporations to behave nicely, said Zellner. It’s ultimately about protecting the bottom line for pension participants.
“We take the position that there are a lot of business practices that are very short- or near-term oriented,” Zellner said. “We think if these companies’ business practices aren’t aligned with sustainable practices for the long term, then the viability of these companies is in question.”
If a company is not sustainable, he said, then it’s generally not a good investment for those planning their retirement.
How positive social-purpose investing works
For more than 20 years, the pension board also has engaged in a third type of socially responsible investing — what it calls Positive Social Purpose Lending.
As part of this program, the board has financed nearly $1.5 billion in affordable housing, community health centers and charter schools for low- and moderate-income people in the United States as well as microfinance loans for people in the developing world. These endeavors are loans, not giveaways, and they achieve the market rate of return, pension board staff say.
Each form of socially responsible investing helps uphold church values, pension board staff members say. In many cases, the investing also gives the denomination a seat at the table where many business decisions get made.
“We want to do well by our participants and all who invest with us by doing good in alignment with church principles,” Boigegrain said.
Heather Hahn is a multimedia news reporter for United Methodist News Service.
News media contact: Heather Hahn, Nashville, TN. (615) 742-5470 or firstname.lastname@example.org.