Sustainable & Socially Responsible Investment FAQs
- Why is it important for The United Methodist Church to invest in a sustainable and socially responsible manner?
- How does sustainable and socially responsible investing make a difference?
Why is it important for The United Methodist Church to invest in a sustainable and socially responsible manner?
The United Methodist Church has a long history of social involvement. John Wesley, Methodism’s founder, proclaimed, “the gospel of Christ knows of no religion, but social; no holiness but social holiness.” Wesley believed and expected that “the people called Methodists” would be actively involved in their communities – feeding the hungry, tending the sick, visiting prisons and helping the poor.
The 2016 Book of Discipline (¶717) clearly instructs that The United Methodist Church In the investment of money, "shall ... make a conscious effort to invest in institutions, companies, corporations, or funds with policies and practices that are socially responsible, consistent with the goals outlined in the Social Principles. All United Methodist institutions shall endeavor to seek investments in institutions, companies, corporations, or funds that promote racial and gender justice, protect human rights, prevent the use of sweatshop or forced labor, avoid human suffering, and preserve the natural world, including mitigating the effects of climate change.
This call for sustainable and socially responsible investing has its roots in the Social Principles, which recognize that “all creation is the Lord’s, and we are responsible for the ways in which we use and abuse it.” More specifically, the Principles declare that “corporations are responsible not only to their stockholders, but also to other stakeholders: their workers, suppliers, vendors, customers, the communities in which they do business, and for the earth, which supports them.”
Resolution 4071, Investment Ethics, further clarifies the United Methodist position: “every financial investment has ethical dimensions with consequences that are both fiscal and social.”
Within our church tradition, sustainable and socially responsible investing is an acknowledgment that how we make and spend our money has serious implications not only to ourselves, but to our communities and to the world in which we live. By being socially responsible in our investments, we recognize that we are stewards of all we possess and that it is within our hands to make the financial decisions that lead to a better, more equitable and more hopeful world for all.
How does sustainable and socially responsible investing make a difference?
For many, sustainable and socially responsible investing is less about results and more about principles, but for others, sustainable and socially responsible investing is an essential ingredient in a well-rounded investment strategy with important results that are both financial and social.
Through a variety of means (most notably, proxy voting, filing shareholder resolutions and engaging corporations in dialogue), sustainable and socially responsible investors are able to encourage – and in many cases, convince – companies to improve their business practices. Such improved practices may include:
- adopting governance structures and policies that are transparent, responsive to shareholders, representative of the diversity of our society and committed to director independence,
- embracing sustainability, the just, responsible and realistic use of resources to achieve both short-and long-range goals, and
- adopting and monitoring labor and human rights standards throughout the supply chain.
These improved business practices usually result in better financial performance and an increase in shareholder value. A recent report by the international law firm of Freshfields Bruckhaus Deringer and published by the United Nations Environmental Program’s Finance Initiative, states, “… the links between ESG [environmental, social and governance] factors and financial performance are increasingly being recognized.”
Other sustainable and socially responsible investing is directed specifically at community improvement and includes affordable housing, community development and microfinance lending. Designed to help low- and moderate-income individuals and families, these loans can have a tremendous influence on the quality of life in disadvantaged communities. For over a quarter of a century, Wespath Investment Management, a general agency of The United Methodist Church, has invested $2 billion to help finance over 51,000 housing units, 23 Charter Schools serving over 8,000 students, and a number of community facilities such as homeless shelters, health centers, and chemical dependency recovery facilities.
Far from being on the “fringe,” sustainable and socially responsible investing has become increasingly mainstream as investors realize that values play an important role in investment decisions. According to the 2007 Report on Socially Responsible Investing Trends in the United States, there are “$2.71 trillion in total assets under management using…socially responsible investing strategies-screening, shareholder advocacy and community investing” “About one out of every nine dollars under professional management in the United States today is involved in sustainable and socially responsible investing…”