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A UMNS Report
By Heather Hahn*
2:00 P.M. EDT July 6, 2011
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. A
UMNS illustration by Kathleen Barry.
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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.
*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.
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