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A UMNS Report
By Heather Hahn*

1:45 P.M. EST July 7, 2010

United Methodist agencies hope to influence companies like BP and Halliburton through shareholder advocacy. A UMNS photo by John Goodwin.

If you have a pension with The United Methodist Church, you have investments in BP, Transocean Ltd., and Halliburton. Likewise, if you have a fund with the United Methodist Church Foundation, you also could have a stake in BP.

That’s not necessarily a bad thing.

Those investments might be the best chance the church has of influencing these energy companies to clean up the oil spill now darkening the Gulf and clean up their acts, say church officials.

“Our position has always been that it’s better to have a seat at the table than none at all,” said David Zellner, chief investment officer with the United Methodist Board of Pension and Health Benefits.

By owning shares, these church organizations have more authority in urging companies to act in a way consistent with United Methodist Social Principles. Such shareholder advocacy can include making phone calls and writing letters to corporate executives. Often, it takes the form of shareholder resolutions that can pressure a company to behave in a more ethical manner.

“If Jesus were here, Jesus would not say, ‘I’m not going to own any shares,’” said Byrd L. Bonner, executive director of the United Methodist Church Foundation. “He would want to own shares so he could get in there and call them to accountability.”

Call to action

As of June 28, the pension board held the equivalent of 133,091 ordinary shares of BP traded on the London Stock Exchange and valued at about $600,000. The board holds 440,816 shares of Halliburton and 82,600 shares of Transocean Ltd. BP owns the well now gushing into the ocean, Transocean owned the Deep Horizon drilling rig and oil services company Halliburton was in charge of cementing the well.

As of July 6, the foundation held 550 shares in BP, worth about $16,100, Bonner said. An investor needs at least $2,000 worth of shares to draw up resolutions under Security and Exchange Commission rules.

The United Methodist Church, like many other faith-based organizations, has long participated in what the financial industry calls socially responsible investing. That means screening out certain investments while engaging in shareholder advocacy with others.

“If Jesus were here, Jesus would not say, ‘I’m not going to own any shares. He would want to own shares so he could get in there and call them to accountability.”
--Byrd L. Bonner

The Book of Discipline, which contains the denomination’s rules and bylaws, requires that all church agencies and institutions including hospitals and universities “endeavor to avoid” certain investments that violate church teachings. These include businesses that engage in racial discrimination and defy human rights with sweatshops or forced labor.

The Book of Discipline also frowns on companies that support gambling, pornography, alcoholic beverages, tobacco or the production of nuclear armaments. As a rule, United Methodist groups will not invest in a company that gets more than 10 percent of its revenue from these products.

The 2008 Book of Resolutions also encourages investments made with certain targeted goals including the reduction of greenhouse gases and the use of power supplies from renewable resources.

“There are several issues with the environment — like clean water, landfills and deforestation in addition to all of the implications of this oil spill — that are more appropriately and more easily addressed through shareholder advocacy, by actually talking to the companies,” Bonner said.

Both Zellner and Bonner can point to some wins using shareholder advocacy. For example, the pension board was instrumental in getting Wal-Mart to no longer use cotton produced in Uzbekistan, which uses child labor.

Talking to BP

Even before the oil spill in the Gulf, the pension board was involved in trying to get Halliburton and BP to be better stewards of the environment.

In 2008, the pension board tried to meet with Halliburton executives to discuss how the company planned to remain competitive in the developing low-carbon energy market. When the energy company did not respond, the pension board filed a shareholder resolution requesting that Halliburton adopt a policy for low-carbon energy research, development and production.

The company challenged the resolution at the SEC, but the federal agency ruled in the pension board’s favor. A few days before the May 2009 annual meeting, Halliburton updated its Web site to include a new section that described the company’s work in low-carbon technology.

Earlier this year, the pension board staff had scheduled a conference call on May 7 with BP officials to discuss what the company was doing to mitigate the environmental risks of its oil sands production in Canada. After the Deepwater Horizon blowout, the pension board planned to use the call to also address what happened in the Gulf.

BP canceled the May 7 meeting and declined further requests from the pension board and other socially responsible investors to hold a teleconference call to discuss concerns about the blowout. The energy giant did agree to engage in individual discussions with concerned investors.

The pension staff was able to participate in an investor briefing on June 6 attended by the BP chair and chief executive officer.

Bonner of the United Methodist Foundation said the most effective shareholder tools in affecting BP policy going forward may end up being shareholder resolutions at its annual meeting.

“There is an interest for all of us in keeping BP afloat and responsible for their actions.” –Peter DeSimone

The Social Investment Forum, a nonprofit association of socially responsible investors of which the pension board is a member, has been holding meetings for investors to discuss the implications of the spill.

Peter DeSimone, the forum’s director of programs and marketing, said forum members have different approaches to the oil and gas industry. Some groups have decided to screen out BP and other oil companies altogether because of their environmental impact.

“I think this raises questions for some on how they want to approach energy going forward,” DeSimone said. “We had similar questions about tobacco a while back, and many [investors] decided just to let tobacco go. Now, I think there are some serious questions they need to ask about oil and gas.”

Competing goods

Zellner still sees investments in the oil industry as worthwhile. The oil and oil service industries represent a significant portion of the investment universe, he said, and the pension board has an obligation to its participants to manage a diversified investment program.

As BP’s recent losses in the stock market show, he said, it also is in a company’s best interest to reduce its environmental liability.

“We believe that adopting sustainable business practices is compatible with the prudent pursuit of suitable investment returns as well as responsible environmental practice,” Zellner said.

DeSimone pointed out that with BP now on the hook for Gulf cleanup as well as the damages to Gulf Coast residents, Americans have an interest in the company’s survival.

“There is an interest for all of us in keeping BP afloat and responsible for their actions,” DeSimone said. “If they go out of business, there go the claims.”

*Hahn is a multimedia news reporter for United Methodist News Service.

News media contact: Heather Hahn, Nashville, Tenn., (615) 742-5470 or newsdesk@umcom.org.