Socially responsible investing – Seventh Generation Interfaith Coalition for Responsible Investing

Vatican Conference encourages adoption of Mensuram Bonam

November 13, 2023November 14, 2023Chris Cox

Recently, I had the honor to represent SGI at the Mensuram Bonam Conference hosted by the Pontifical Academy of Social Sciences in Rome. The conference drew about 120 people from around the globe to reflect upon the document and the state of faith-consistent investing. Participants included clergy and religious and lay persons who serve within religious congregations, archdioceses and dioceses, asset advisors and managers, banks, foundations, and faith-based investor coalitions.

Cardinal Peter Turkson addresses the conference.

The conference gathered us a few days after the Vatican’s Synod on Synodality concluded, and so we dialogued, in the synod’s spirit, with deep listening to others alongside a commitment to co-responsibility. The conference aimed to to prompt collaborative learning and reflection on Catholic Social Thought, using Mensuram Bonam as a source and guide in faith-consistent investing. We shared lessons, ongoing questions, best-practices, and dreams. Practically, the conference identified certain future collaborations to advance the faith-consistent investing movement.

As the document nears its first anniversary, Mensuram Bonam increasingly bears greater weight in Catholic investing. For instance, Catholic bishops make an Ad Limina visit to the Holy See every five years. During the visit, they provide written reports and meet with Pope Francis and with the various dicasteries and offices of the Roman Curia. (U.S. Catholic bishops will make their next visit in 2025.) In the visitation to the Pontifical Academy of Social Sciences, Mensuram Bonam is on the agenda.

Further, the climate crisis makes Mensuram Bonam increasingly important. Months after Pope Francis published his 2015 environmental encyclical Laudato Si’, the United Nations Sustainable Development Goals (SDGs) and the Paris Agreement were adopted. Now, eight years later and with the world halfway toward the SDGs’ 2030 deadline and the Paris Agreement’s goal to halve global emissions, Pope Francis renewed the call for urgent climate action in the apostolic exhortation Laudate Deum. Pope Francis underscored that our responses to the climate crisis have been inadequate.

Numerous local churches, especially in the global North, adopted guidelines prior to Mensuram Bonam, and Mensuram Bonam represents the affirmation and on-going development of that work. The U.S. Catholic Conference of Bishops adopted their first socially responsible investment guidelines in 1991, revised them in 2003, and revised them yet again in 2021. German Bishops issued guidelines in 2015 and revised them in 2021 (English translation), Austrian Bishops have had guidelines since 2018 (English translation), and the Italian Bishops Conference issued their guidelines in 2020, among others. During the conference, I came to appreciate how advanced European asset managers are in the practice of ESG. Mensuram Bonam also aims to urge those local churches without them to develop their own guidelines.

Fr. Séamus Finn, O.M.I., Chris Cox, Anna Falkenberg, and Katie McCloskey

ICCR members had a significant role in the conference. Fr. Séamus Finn, O.M.I. was one of the organizers. Mercy Investment Services, Christian Brothers Investment Services (CBIS), and Socially Responsible Investment Coalition (SRIC) also participated. We had ample opportunities to share our experiences, and I felt privileged to share stories from SGI’s fifty years in faith-consistent investing. While the U.S. and Europe were early adopters, led by ICCR and pioneers like Fr. Mike Crosby, O.F.M., Cap., the global South had important interventions in the conference. There were many hopeful signs at the conference. For instance, Italy’s Alessandra Viscovi recently launched an Italian organization modeled on ICCR.

The conference advanced reflection and practice concerning the relationship between faith and finance. Starting from the shared conviction that no investment is morally neutral, participants explored the vocation of investor, inspired to invest in the production of good goods, with a commitment to good work, so that the enterprise of business might yield good wealth.

Do You Consider Yourself To Be An Activist?

November 3, 2022March 28, 2023sgicoalition

By Frank Sherman

I was at a sustainability conference last week that was attended mostly by business and academia. After introducing myself and SGI at our table, I was asked “Do you consider yourself to be an activist?”

I hesitated for what felt like an eternity. What a loaded question! Was this a trap? Did he think I was going to the Milwaukee Art Museum after the conference to throw tomato soup on the paintings and glue my hands to the wall?

Given all the buzz about “anti-ESG,” “woke capitalism,” and “socialist political agenda” these days, I didn’t want to play into the culture war narrative. Republicans candidates for financial offices in Arizona, Florida, Illinois, Kansas, and Minnesota have all taken anti-ESG positions. They and other Republicans say big financial firms are abusing their power to advance a liberal agenda on issues like diversity, social justice and, especially, climate change. One Senator even accused Blackrock of breaking antitrust laws by being a member of the Climate Action 100+ coalition (which includes SGI, by the way).

Most of the general public don’t understand what ESG means. The simplest description is a set of environmental, social, and governance considerations that investors use to try to understand risks and opportunities that aren’t accounted for in traditional financial models. For example, environmental risks like climate change present physical and transition risks that are not reflected in a company’s P&L or balance sheet. Another risk unaccounted for in the company’s financial statements are their impacts on human rights: to their employees, suppliers, customers and society at large. Although not recognized in financial reporting, these risks are very real…to individual companies and to the economy as a whole. They vary by region, industry, and individual company. Most investors and the public are blind to the magnitude of these risks. As society’s awareness of these risks increases, asset managers large and small are taking them into account in their portfolio management and corporate engagements.

Companies like Blackrock are pushing back on state laws which try to protect the fossil fuel industry (e.g. TX, WV) by explaining that ESG strategies are part of their fiduciary duty to manage material risks for their clients. But is that why SGI members use the ESG strategies? Is our sole incentive to manage long-term financial risks?

That’s part of it, no doubt. We are responsible for managing these funds as an obligation to our community members or clients. But SGI’s mission statement states that we also want to “to build a more just and sustainable world for those most vulnerable.” Our fiduciary duty goes beyond getting an adequate return on investment to also promote human dignity, act justly, enhance the common good, and provide care for the environment. The recently updated USCCB SRI guidelines speak to this double objective. The Guidelines are based on two principles: responsible financial stewardship and ethical & social stewardship based on Catholic moral principles. They espouse three strategies: Avoid Doing Harm, Actively Work for Change, and Promote the Common Good.

In addition to managing financial risks, SGI members view shareholder engagement with corporations as a powerful catalyst for social change. ICCR’s tag-line – “inspired by faith, committed to action” – sets forth our pledge to be active owners. Although I wouldn’t label SGI members as “activists,” we have been active owners for nearly 50 years. And I wouldn’t describe our capitalism as “woke” yet, but people are starting to wake up to the fact that the economy is supposed to serve society rather than the other way around.

Back to my conference table… I don’t think I answered the question posed to me very well at the time. With more time to reflect, I would respond that rather than an activist, I would describe SGI members as active owners inspired by faith!

Some helpful resources concerning the pushback on ESG investing:

ICCR has developed this page of resources to respond to anti-ESG rhetoric.
US SIF created the ESG Truths website.
This is an interesting post on the The curious origins of the anti-ESG movement.
Everything You Need to Know About ESG Investing And the Backlash to It. From the Washington Post (with a free link).
ESG as Process Versus ESG as Product from John Hale of Morningstar
Is ESG a product or a process?, a video commentary on the Morningstar article from the Francesco Collaborative.
Bennett Freeman takes it up amid a conversation about conflicted-affected and high-risk areas at our conference here.

Socially Responsible Investing requires effort

March 24, 2021August 16, 2021Chris Cox

Tariq Fancy, BlackRock’s former chief investment officer for sustainable investing, made a startling confession in a recent USA Today editorial:

In essence, Wall Street is greenwashing the economic system and, in the process, creating a deadly distraction. I should know; I was at the heart of it.

Fancy went on: “In truth, sustainable investing boils down to little more than marketing hype, PR spin and disingenuous promises from the investment community.”

It’s quite an indictment from a significant voice in the ESG sector, but, based on my personal experience working for Seventh Generation Interfaith for the past several years, I do not believe that it conveys the whole truth of the matter.

Yes, there are asset management firms that over-hype their ESG product. They slap an ESG label on a fund that screens out certain sectors and perhaps speak to a few companies about their climate actions and sell it at a higher price than non-ESG products. A recent Wall Street Journal article reported 43% higher fees for ESG products in one class of assets. Visit a grocery store, and a higher-priced item with a “Naturally Raised” or “Fresh” label may attract more consumers, even if neither quality is in any measurable sense true. The old Latin adage holds: Caveat Emptor! Buyer beware!

When we look under the hood, so to speak, at many ESG funds, there are reasons to be concerned.

Even as investors demand ESG investments, those funds labeled ESG may not always reflect investor preferences in their proxy voting. Last month, a study from Robeco Asset Management and the Erasmus University of Rotterdam School investigated a decade of proxy voting data, and concluded that large, passive asset managers vote the least in favor of ESG proposals. Further, PRI signatories in the U.S. did not even vote their proxies as well as other U.S. firms that did not describe themselves with an ESG label. Fiona Reynolds, CEO at PRI, recently responded to the report with a commitment to take action. Reynolds went on to give an unusual warning: “being a PRI signatory should not be the only due diligence test for investors.”

Asset owners who rely on negative screens and “ESG” funds can be misled. Vincent Deluard of StoneX authored a recent report entitled “The ESG Bubble: Saving the Planet and Destroying Societies.” Deluard points to blind spots in customary ESG screens. He notes, “companies with a high ESG rating pay a much lower tax rate than their less virtuous peers.” As well, he observed that “ESG funds are biased against humans: the 15 most highly-rated companies employ just 1.9 million workers, versus 5.1 million for the 15 worst-rated ones.” He concludes: “By channeling more money towards these (already wealthy) companies, ESG funds are unconsciously worsening the social and political crisis associated with automation, inequality, and monopolistic concentration.”

While Deluard’s study can cause suspicion of all ESG products, there are hopeful signs on the horizon. Last week, acting SEC chair Allison Herren Lee spoke to the proxy voting issue, saying, “We know investors are demanding ESG investment strategies and opportunities, but funds may not always reflect those investor preferences in their voting” and suggested that the SEC may need to take action on proxy voting disclosure. Further, Gary Gensler, the nominee to lead the Security and Exchange Commission, has indicated that he favors greater ESG disclosures, and the SEC as a whole is making ESG a priority. Most importantly, there are firms that do the hard work. For an asset owner, asking good questions of an asset manager can help discern if the firm is committed to doing this work. [We will soon have a blog post that examines some good questions to ask.]

The faith community, with ICCR leading the way, has pioneered socially responsible investing for fifty years. Many asset managers and advisors who are ICCR members are not doing the greenwashing that Mr. Fancy called out. And SGI members recognize their fiduciary responsibility and power of ownership to change the system for the better. SGI members create value by improving the conduct of portfolio companies and, at the same time, create real world impact for people and planet.

Webinar: Fossil Fuels: Engage or Divest

November 16, 2020February 25, 2021Chris Cox

On Monday, November 9th, the U.S. Federal Reserve Bank recognized climate as a risk. Investors of all types can no longer afford to be on auto-pilot concerning investments in fossil fuels. This webinar explores two options: active engagement or divestment. We hear from Rob Berridge and Morgan LaManna of Ceres on how the recommendations of the CA 100+ and the Task Force on Climate-related Financial Disclosures (TCFD) can enhance engagement with companies. We hear from Fr. Peter Bisson, S.J., former provincial of the Canadian Jesuit province. Under his leadership, the province became the first province to divest from fossil fuels shortly after Laudato Si’. Again, we are very grateful for the presence of Rob, Morgan, and Fr. Peter in this webinar, for their commitment to this work, and their generosity in sharing their wisdom and experience with us. As always, we welcome your feedback via a confidential evaluation found here. Slides are available here.

Webinar: Positive Screens: Going Beyond the Negative

August 21, 2020Chris Cox

On Friday, August 21st, SGI’s quarterly webinar addressed adopting positive portfolio screens. Many portfolios rely simply upon negative screens, the exclusion of certain companies from investment consideration based on social or environmental criteria. A negative screen, for instance, can preclude investing in tobacco, gambling, alcohol or weapons manufacturing. John Mueller of Dana Investment Advisors and Ariane de Vienne of Institutional Shareholder Services (ISS) discuss how one might view and implement positive selection criteria from the perspective of the asset manager and the asset owner. Again, we are very grateful for the presence of John and Ariane in this webinar, for their commitment to this work, and their generosity in sharing their wisdom and experience with us. As always, we welcome your feedback via a confidential evaluation found here. Slides are available here.