Pioneer in Faith and Finance for 50 Years-The United Church of Christ-by Timothy Smith-Boston Trust Walden

The United Church of Christ: Pioneer in Faith and Finance and a Force for Change 50 Years Later

By Timothy Smith, Boston Trust Walden

The United Church of Christ (UCC) was present at the creation of a new era in the intersection of faith and finance. It was a crossroads moment, but few were aware of its significance at the time.

United Church of Christ logoIn the early 1970s, energized by the anti-war and anti-apartheid movements, the women’s movement, and the battle for civil rights, Protestant denominations began to examine how their religious values and social justice positions were reflected in their investing and business decisions. For many years, these existed as different realities in the Church, creating an informal split where the social justice agencies of the Church and the financial offices operated with two different and separate agendas. But that was soon to be challenged, and profoundly so.

By the early 70’s, the UCC’s General Synod had passed resolutions challenging the racist system of apartheid in South Africa, critical of the Vietnam war, and affirming protections for the environment. The Corporate Information Center based in the National Council of Churches began to bridge the gap between statement and action and started looking at major U.S. companies with investments in South Africa, or contracts with the U.S. Department of Defense in support of the war. The connection had been made, and soon there were newspaper stories exposing the fact that denominations owned stock in Dow Chemical, the maker of napalm, or banked with Citibank, then one of the major lenders to the South African government. And, of course, from a theological perspective, it was logical to believe that all the resources and agencies of denominations should be consistently working together for peace and racial justice.

However, translating that belief into reality was not so simple. The social justice staffs in denominations usually had limited skills in investment, and finance and treasurers’ offices were focused on budgets and the financial health of the denomination. Still, a robust discussion started on Christian ethics and investing, examining the ethical soundness of owning stock in companies that made napalm or cluster bombs and considering our leverage as a stockholder in companies where we wanted to raise social justice and moral issues.

Amidst these discussions, the predecessor of the Interfaith Center on Corporate Responsibility (ICCR) was born with the support of five denominations, including the UCC. ICCR began the task of coordinating work in the faith community on responsible investing and advocacy with corporations.

The UCC was a pioneer joining with a few others to file shareholder resolutions with companies, bringing important issues to the desks of management and for votes at shareholder meetings. There was no roadmap on how to proceed in this space. Neither investors nor companies had experience in discussions on sensitive issues like investing in apartheid South Africa or strip mining. But into the unknown the United Church of Christ walked. After filing a shareholder resolution with Mobil Oil requesting that the company evaluate and report to shareholders on their operations in South Africa, to our surprise the General Counsel of the company offered to talk and eventually agreed to provide the requested report for investors. This was the first “agreement” resulting from a shareholder resolution, and the UCC was the sponsor and stimulus. A win-win with compromises on both sides.

Apartheid was a prominent focus in those early days, but it wasn’t the only one. Because of our interfaith connection and at the suggestion of the Episcopal Church, the UCC helped create a public hearing in Puerto Rico focusing on the environmental hazards of a proposed copper strip mine in the middle of the island, a huge environmental disaster in the making. This Church-led hearing, which included testimony from the mining company as well as environmental experts, stimulated widespread publicity and unearthed environmental risks that were formerly unexamined. In the end, the permit was pulled for the mine.

“Success” in these early days included getting a three or five percent vote on a shareholder resolution and the accompanying publicity on the important issue being raised. These examples remind us that the UCC has 50 years of history in the area of faith and finance. We were a key creator and pioneer, a lonely prophet at times, and a sensible moral voice in the boardroom at other times.

Let’s jump forward almost half a century. The context for the Sustainable Responsible Impact (SRI) investor is a very different one today. In 2020, the Principles for Responsible Investing (PRI) has global investor members with over $100 trillion in assets affirming their belief that Environmental, Social, and Governance (ESG) investing is a duty because these issues affect the company bottom line. The UCC is an active member of PRI.

The Climate Action 100+ campaign, which addresses some of the world’s largest greenhouse gas emitters, is made up of investors with over $40 trillion in assets, including the Pension Boards of the UCC, BlackRock, and JPMorgan Chase. They have presented a specific set of climate demands to these companies.

In 2020, twenty social- and climate-related shareholder resolutions resulted in winning votes of over 50 percent and dozens more with votes in the 40-50 percent range, which demonstrates expanding support by investors for these resolutions. There were also dozens of negotiated agreements, when investors and companies worked to find joint agreements that captured progress and allowed for a shareholder resolution to be withdrawn.

As a sign of the expanded engagements by large investors, in 2020, BlackRock announced it was engaging with over 200 companies that needed to improve their climate performance and created a “watch list” of companies threatening to vote against their boards if substantial improvements were not made.

On the corporate side, virtually all large companies now do Sustainability Reports that help them measure, manage, and report on their work to be a sustainable and responsible company. Many include strong climate and diversity goals and describe how they believe their work on sustainability contributes to the bottom line. In 2019, 189 CEOs who were members of the Business Roundtable (BRT) made a joint statement declaring their belief that companies needed to be responsible to stakeholders and not just stockholders (to employees, customers, and communities, for example). While some of the issues being raised by ESG investors have decades of history (diversity, good governance, human rights, expanded transparency), many are new issues. These include plastic pollution, dangerous chemicals in products, food safety, and fair treatment of employees—whether these are U.S. workers facing COVID-19 in the workplace or the safety of factories in Bangladesh. The UCC has worked specifically on the issue of migrant worker health and safety as well as the safety of poultry workers at Tyson Food and forced labor in Chinese factories.

The issue of companies using their considerable stature and dollars to influence public policy has been on investors’ agendas for over a decade. One subset of that discussion is how companies and their trade associations have been lobbying on climate-related issues. Many trade associations have been forceful in blocking forward-looking climate regulations and legislation over the years. Investors including the prestigious Climate Action 100+ coalition have championed this issue with key companies. In Europe there has been considerable success with 15 companies, including Shell and BP, analyzing and evaluating their trade associations’ climate policies, putting some “on watch,” and withdrawing from a few associations with which they disagree on climate.

This same request for a full review of direct and indirect climate lobbying was presented to over 45 U.S companies last year by global investors with over $6 trillion in assets under management.

In addition, investors filed resolutions with several U.S. companies on “climate lobbying.” The resolution to Chevron received a remarkable 53% vote, reflecting strong investor support for a such new initiatives. It is expected that a greater number of dialogues will take place and similar resolutions filed during the remainder of 2020 and through 2021. This obviously raises the profile and may be a force for a changed company voice on climate policy going forward. A taste of things to come!

Today, the UCC is doing its socially responsible investing work in a new and rapidly changing environment. What are the component parts of the UCC’s work moving into this new decade?

Of course, there are basic screens that avoid particular companies or industries such as tobacco, firearms, gaming, and oil/tar sands. And General Synod has given strong guidance and criteria on fossil fuel companies to avoid.

Faith-based investors seek to have all asset cases they utilize be consistent with their faith values. The UCC has looked at fixed income and has invested $300 million in social and green bonds, such as renewable energy and women and minority-owned businesses, and in the private equity arena, joining investments on climate, education and health.

As an “active owner” and engaged investor, the UCC works with other concerned shareowners and uses its voice and leverage as a stockholder to influence company policies, practices, and behavior. This active engagement includes:

  • Writing letters to management, either as the UCC or working with others
  • Joining in public statements on issues like COVID-19 and company responsibilities;
  • Participating in dialogue with management
  • Filing shareholder resolutions to press a specific request with a company in the hope of finding common agreement
  • Sending representatives to speak at stockholder meetings
  • Voting proxies as a responsible owner
  • Working on public policy issues, such as protecting shareholder rights at the SEC and supporting investor use of ESG investing (under attack by the Department of Labor, which is presenting a new proposal limiting ERISA pension funds)
  • Publicly educating UCC members and other investors

The big question as we do this work has been and continues to be: Does it have an impact and make a difference? Or are we religious Don Quixotes, tilting at corporate windmills?

Fortunately, we can point to a history of demonstrated impact over five decades! We have not always been successful and there is still progress to be made. But clearly, we can say that the pioneer record and spirit of the UCC in the area of faith and finance planted seeds years ago that are blossoming today.

 

Article by Timothy Smith, a graduate of Union Theological Seminary in New York City. While at Union and after graduation he worked at the Council for Christian Social Action of the UCC as their staff person on Southern Africa. Tim assisted in the founding of the ecumenical work that led to the formation of the Interfaith Center on Corporate Responsibility (ICCR), serving as its Executive Director. He was involved in the very first church-sponsored shareholder resolutions in the early 1970s.

Since 2000, he has been the Director of Shareowner Engagement for the investment firm Boston Trust Walden. He has also served on the Board and Principles Committee of Wespath, the pension board of the United Methodist Church. Tim attends South Church in Andover, UCC, in Massachusetts.

This article was originally published in Generations Journal from the Pension Boards – United Church of Christ, Inc. Operating at the intersection of faith and finance. Reprinted with permission from the author.

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