Translating Values into Policy

By Frank Sherman

As members of Seventh Generation Interfaith (SGI), we profess to “view the management of [our] investments as a powerful catalyst for social change,” but how well do we do this? Many SGI members are reviewing their overall approach to faith or mission-based investing, beyond corporate engagements.

Robert Wotypka, OFM-Cap, reported on his efforts to answer this question for his Capuchin Province during our spring member meeting. He has asked his investment committee and their financial consultant on how they are integrating ESG criteria across their entire portfolio.

The Sisters of St. Francis in Dubuque, IA recently had a workshop facilitated by Chris Cox of SGI to reflect on this question. They feel they are doing an adequate job of taking active ownership by voting their proxies, participating in corporate engagements and filing resolutions; however,they want to better incorporate their values into their investment policy and practices. Anita Green, Director, Sustainable Investment Strategies for Wespath Investment Management shared how the United Methodist Church approaches this topic. Anita described Wespath’s three strategies of Avoid (ethical exclusions), Engage(proxy voting, corporate engagements, political advocacy) and Invest (external manager benchmarking, Positive Social Purpose Lending Program, and low-carbon solutions). They take a holistic approach across all asset classes encompassing their entire portfolio.

A growing strategy of socially responsible investing is community or impact investing. Pope Francis has encouraged Catholic institutions to engage in impact investing with the Vatican hosting their third impact investing conference on this topic last summer. Wharton Business School recently interviewed John O’Shaughnessy, CEO and CFO of the Franciscan Sisters of Mercy, a Roman Catholic group based in St. Louis, MO, on this topic.  “We have carved out 15% of our overall portfolio – about $10 million – and directed that towards impact investing,”said O’Shaughnessy. He described 17 impact investments that the Sisters have made from clean energy to low-income populations worldwide including sustainable timber operations, conservation forestry and detoxing of the environment. “This can be systemic change,” he said of the potential of impact investing. “This is capitalism at its best.”

We added a new section on our “Resources” page, entitled “Incorporating ESG/ SRI Strategies” with some tools that you may find helpful. We will host a webinar next spring on SRI strategies and how our members can better manage their financial assets more holistically. I hope you will be able to join us.

How Well Are Your Financial Service Companies Incorporating ESG?

by Frank Sherman

Of US institutional investors, 43% incorporate ESG factors into their investment decision-making process, according to the sixth annual ESG survey by Callan. This percentage has almost doubled since the survey was first launched in 2013. Yet many financial service companies only pay lip service to these issues. How well do your financial advisors and money managers incorporate ESG best practices?

The Forum for Sustainable and Responsible Investment (US SIF) is committed to advancing sustainable, responsible and impact (SRI) investing across all asset classes. One of the core deliverables from their strategic plan is to identify and disseminate information about best practices within the field and provide tools for practitioners to undertake a rigorous and comprehensive approach to sustainable and impact investing. They published a Roadmap for financial advisors earlier this year on how to incorporate SRI investing into their practice. US SIF released a second Roadmap this month, this time focused on money managers. This Roadmap describes steps to establish board and senior level oversight; identify sources of ESG data, research and training; develop an ESG incorporation strategy; implement an investor engagement strategy; measure impact; and participate in building the field. Due to come out later this year, the third and final guide in the US SIF series will focus on asset owners.

I recommend that SGI members read and share these guides with their Investment Committees and question them on how well your financial advisors and asset managers have incorporated these best practices into their services.

Seventh Generation Interfaith will continue to support your corporate engagements and public advocacy on your community’s priority social and environmental issues. . . a key part of your SRI investment strategy.