D008 Practicing Responsible Investing

Original version

Resolved, the House of _______ concurring, That the 79th General Convention commends to the whole Church the witness to the Gospel of individuals and institutions across the Church for over half a century through socially and environmentally responsible investing consistent with the Church's faith and mission including the Church’s teachings on respect for the dignity of every human being and on the stewardship and care of creation (“responsible investing”); and be it further

Resolved, That the 79th General Convention affirms for the Church the following elements of responsible investing consistent with the Church's faith and mission as practiced today by many institutional investors across the Church: applying ethical guidelines in investment selection and management, shareholder activism, and investing for responsible social and environmental outcomes as well as financial return; and be it further

Resolved, That the 79th General Convention recommends that consideration be given across the whole Church to practicing these three elements of responsible investing consistent with the Church's faith and mission and particularly recommends all three of these elements of responsible investing for consideration by the governing body of every diocese, parish, or other organization or institution in the Church that owns or invests investment assets (any “Church Institutional Investor”), as follows:

The 79th General Convention urges the governing body of every Church Institutional Investor to consider developing and adopting ethical guidelines for responsible investing consistent with the Church’s faith and mission, and implementing them in choosing and managing investment assets under its control, and urges every Church Institutional Investor with sufficient assets to consider becoming a signatory to the United Nations Principles for Responsible Investment; and

The 79th General Convention urges the governing body of every Church Institutional Investor to consider having that Investor vote its proxies consistent with the Church's faith and mission, and, to this end, urges Church Institutional Investors to consider using the proxy-voting services provided by The Episcopal Church and the Church Pension Group, and urges every Church Institutional Investor with sufficient assets to consider undertaking advocacy and dialogue with company managements and to consider joining the Interfaith Center on Corporate Responsibility; and

The 79th General Convention urges the governing body of every Church Institutional Investor to consider having that Investor, consistent with the Church's faith and mission, invest for responsible social and environmental outcomes as well as financial return by, for example, carrying out impact investing through its regular portfolio and community investing through its regular portfolio or a separate community investment mechanism.

Explanation

What is new here: calling on all Church Institutional Investors to consider adopting and practicing all three of the elements of responsible investing that have been and continue to be used by many institutional investors in the Church: implementing ethical guidelines, shareholder activism, and investing for responsible social and environmental outcomes, all done consistent with the Church's faith and mission.
Now it seems more than ever that the global economic system raises issues of social, economic, and environmental justice daily. Yet since at least the 1960s individuals, congregations, dioceses, and other institutions across the Church, and General Convention and Executive Council, again and again have acted in witness to the Gospel through responsible investing. Perhaps the most dramatic early example: in 1971 Presiding Bishop John E. Hines stood up at the General Motors annual meeting to present the first ever shareholder resolution by an investor of faith. On behalf of TEC, Bishop Hines called on GM to stop doing business in South Africa. That was the opening move by investors in support of the wider effort to end apartheid.
Responsible investing has three elements: (i) implementing ethical guidelines in investment management, (ii) shareholder activism, and (iii) investing for responsible social and environmental outcomes.
For years Church institutional investors have applied ethical guidelines in investment selection and management regarding a number of issues, including apartheid, tobacco, and fossil fuels. As responsible investors do, Church investors have used methods such as “negative screens” (e.g., “no buy” lists and divestment) and “positive screens” (e.g., choosing investment opportunities that support ethical goals, such as alternative energy companies).
As the field has matured and information on issues has become more widely available, an approach to implementing ethical guidelines for responsible investing has evolved: addressing environmental, social and governance (“ESG”) issues throughout the investment management process. Addressing ESG has become a commonly accepted approach; there are managers and consultants who can help institutional investors implement their ethical guidelines through applying ESG. Moreover, academic analyses have shown that ESG investing delivers long-term financial returns competitive to those obtained through traditional (non-ESG) approaches, as well as positive social and environmental impact.
The Trustees of the Diocese of New York have adopted responsible investing based on ethical guidelines as investment policy and ESG as the approach to implementing that policy.
Signing on to the UN Principles for Responsible Investment (PRI) obligates an institutional investor to apply ESG. The Diocesan Investment Trust of the Diocese of New York is now a signatory to the PRI. See below for more on the PRI.
Both The Episcopal Church – through Executive Council’s Committee on Corporate Social Responsibility (CCSR) – and the Church Pension Group vote their proxies, submit shareholder resolutions and actively advocate with managements on issues. In recent years the issues dealt with through such engagement include human trafficking (both sex trafficking and labor trafficking), climate change, indigenous rights (including Dakota Access), human rights (including Israel and Palestine), and gun safety. TEC and the CPG seek to develop shared positions and annually seek to vote their proxies consistent with their positions. TEC and the CPG enable other Church Investors, now at no cost, to have their proxies voted along with those of the CPG and TEC. The Diocese of New York now votes its proxies by means of this arrangement Both TEC and the CPG work ecumenically and across faiths through the Interfaith Center on Corporate Responsibility. See below for more on ICCR.
Investing for responsible social and environmental outcomes, the third element, may be defined as investing for a financial return – as with all institutional investing – and, at the same time, acting to promote one or more responsible social and/or environmental outcome(s) through that investing – sometimes called a “double bottom line.” Two common methods are impact investing and community investing. Impact investing puts assets into private capital arrangements, either as debt or equity, and commonly, but not always, for market rate returns. Community investing puts assets into community financial institutions, commonly as debt and commonly, but not always, at subsidized rates. Either community or impact investing may, for example, promote social and economic justice by financing affordable housing.
Community investing invests in community financial institutions that in turn provide capital, usually with management support services, to community organizations that cannot access conventional financing. Executive Council’s Economic Justice Loan Committee (EJLC) administers a $7 million fund of TEC investment assets making loans to community development financial institutions such as credit unions and loan funds that in turn make loans for housing, small business development and social service programs. At the diocesan level, the Diocese of New York is now forming a diocesan community development credit union.
CPG has about $1 billion in impact investments at market rates in its regular portfolio overseen by its Investment Committee. CPG makes impact investments in private market pools to supply capital for groups and communities with needs often not being met through the usual capital markets. Such private pools can provide larger aggregate amounts for communities than community development institutions typically can. CPG impact investments, for example, provide financing for affordable housing and for installing solar panels for households in developing countries to bring them electric power, often for the first time, through environmentally sustainable and economical means.
United Nations Principles for Responsible Investment
The UN Principles for Responsible Investment (PRI) are a set of principles developed in 2005 by institutional investors under the sponsorship of the UN. This is a link to the PRI website page about the PRI: https://www.unpri.org/pri To adopt the PRI, an institutional investor becomes a “signatory" to the PRI and joins a network called the PRI initiative. Well over 1,000 institutions in the United States, Europe and the United Kingdom have joined. The Church of England and its pension fund are signatories. In the U.S., universities and pension funds, as well as the United Church of Christ and the United Methodist Church, have joined.
As noted above, joining the PRI initiative obligates an institutional investor to apply ESG in its investment management. Signatories are not required to agree on outcomes, or how to deal with such issues, but, by joining, each institution agrees that it will deal with the ESG issues that arise for the institution as it acts as an investor.

The six Principles for Responsible Investment are:
1 We will incorporate ESG issues into investment analysis and decision-making processes.
2 We will be active owners and incorporate ESG issues into our ownership policies and practices.
3 We will seek appropriate disclosure on ESG issues by the entities in which we invest.
4 We will promote acceptance and implementation of the Principles within the investment industry.
5 We will work together to enhance our effectiveness in implementing the Principles.
6 We will each report on our activities and progress towards implementing the Principles.
The PRI Initiative is a voluntary, cooperative effort. The sixth Principle is key: “We will each report on our activities and progress towards implementing the Principles.” Every signatory must report annually in a common format, which makes signatories publicly accountable. The reporting requirement means any signatory needs to have internal capacity to track its efforts to implement the PRI – to be able to indicate how it has incorporated ESG analysis into its processes and decisions. Joining the PRI Initiative is not for every institutional investor; in particular, those with smaller amounts of assets may well not have the resources to join.
If a Church Institutional Investor elects not to become a PRI signatory, that Investor nevertheless should consider incorporating ESG analysis into the implementation of its ethical guidelines. And, whether or not a Church Institutional Investor signs on to the PRI, every Church Institutional Investor should consider reporting regularly on its responsible investing efforts to the appropriate constituencies.
Interfaith Center on Corporate Responsibility
The Interfaith Center on Corporate Responsibility (ICCR) was organized in 1973 as a result of church-led shareholder activism focused on South Africa. TEC was a founding member. Today ICCR is a preeminent shareholder activist organization, with about 300 members. Most are investors of faith, principally Protestant denominational bodies and Roman Catholic orders, but the members include Muslim and Jewish organizations. Through ICCR investors advocate for corporate social and environmental responsibility, file shareholder resolutions, engage in dialogue with companies, and advocate for public policies supporting corporate responsibility. See the ICCR website: http://www.iccr.org/
The entire deputation from the Diocese of New York supports this resolution. The resolution draws on resolutions adopted in 2015 by the New York Diocesan Convention for the diocese.


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