Will ETF providers join the Church and save the planet?
Religious organizations are challenging corporations over climate change, while big investors stay mute.
I like to look through shareholder resolutions, it makes me feel better. As policymakers increasingly disappoint on environmental and social issues, I take some comfort in seeing that there are organizations trying to make a difference.
I wasn’t always so shareholder-friendly. Shareholders and their demand for returns have, in my mind at least, pushed companies to stretch their ethics and business lines into sometimes dubious areas.
Recently, however, I have begun to think that shareholders could be the unlikely heroes when it comes to the environment. And browsing through sustainability organization Ceres’ data on shareholder resolutions in the oil and gas sector, I found that one sector of activists is emerging as, somewhat aptly, a potential saviour of the planet – religious organizations.
This year and last, among the traditional environmental and social responsibility investment stalwarts on Ceres’ list such as Needmor, As You Sow, Walden, CalSTRs and New York State, were the Unitarian Universalist Association of Congregations, The Province of St Joseph Order of Capuchin Monks, the Presbyterian Church, Wespath (The United Methodist Church), The Sisters of Mercy Investment Services, the Benedictine Sisters of Mount St Scholastica, the Sisters of St Dominic from Caldwell, New Jersey, and the Nathan Cummings Foundation (a fund that emphasizes its grounding in Jewish beliefs).
Rather than divesting from fossil fuels, these religious activists have targeted oil and gas giants such as Chevron, Exxon Mobile, ConocoPhillips and Suncor, demanding disclosure on lobbying, methane emissions and fracking impact, and asking for environmental expertise to be added to the board.
These are all perfectly sound and necessary issues that should be raised by any oil and gas investor – only the largest shareholders, the top index fund managers, aren’t bothering to ask, so it is left to monks and nuns to do the job.
Religious organizations and their endowments and pension funds have long been champions of SRI, which has typically involved screening out tobacco, alcohol and weapons. Most of them also make affirmative investments – a percentage of assets allocated to human rights, community investments, or an economic justice portfolio, for example.
But, as the Ceres data shows, more recently religious organizations are taking their role as responsible investors to a new and much more vocal level over climate change.
What strikes me as most interesting about the rise of the religious shareholder activist is the stark contrast with the lack of leadership of some of the index funds
Further evidence of this occurred in January when the Church of England, alongside the Environment Agency Pension Fund, launched an international initiative to look at how the companies they invest in are transitioning to a low-carbon economy. They galvanized support from another 17 asset owners who joined them in the ‘Transition Pathway Initiative’.
Together the group have more than $2.7 trillion in assets under management. It is slightly bizarre to think of the Church of England rallying the likes of BNP Paribas, Hermes and Aviva around responsible investing on climate change.
It is part of a larger movement at work, of course, where the Pope, rabbis, archbishops and the Dalai Lama are pushing their followers to do more than just pray. It’s called spiritual ecology and it’s growing fast, but inspiring and heart-warming as it is, religious organizations just do not have the monetary clout to fight the battle alone.
The Church Commissioners for England Endowment manages about $10 billion. The Vatican Bank has about $8 billion.
One would think that maybe US religious organizations have a good chunk of change, but it doesn’t appear to be so.
The only study of the collective US church wallet I’ve ever found was by Wilmington Trust’s Walter Dillingham. Admittedly he only managed to track down funds at Catholic foundations, which indeed are growing, but he didn’t uncover a huge amount of money. The ones he located appeared to have about $4.6 billion in assets.
What strikes me as most interesting about the rise of the religious shareholder activist is the stark contrast with the lack of leadership of some of the index funds. Here are these religious organizations with diminished power and relatively little money standing up to fight for the planet, while the largest index funds in the world, which are hitting their stride as the ETF market booms, are doing very little.
Motley Fool says Vanguard, State Street and BlackRock are the three biggest institutional owners of Exxon Mobil stock, and together they have a staggering $11 trillion in assets under management. Think of the impact they could have.
Yet last May, BlackRock and Vanguard voted against a high-profile proposal calling on Exxon to report on the impact climate change policies could have on its business – votes that helped Exxon defeat the measure. State Street, (the smallest of the three) on the other hand, did back the proposal.
In fact, last year State Street’s support for resolutions made at S&P500 companies, including Exxon Mobil and Chevron, more than tripled, according to Fund Votes – and the firm was twice as supportive as its largest asset management competitors.
There is hope. Competition in the booming ETF market is fierce and, lest we forget, ETFs are the darling of the ethical and environmentally-protective millennial generation – BlackRock and Vanguard won’t want to let State Street be the climate change hero alone. Fingers crossed. Perhaps this year I’ll be reading shareholder resolutions made by more than the usual suspects and religious organizations.