Investing for an Impact

By G. Jeffrey MacDonald

For almost a half century, Episcopalians have collectively used their voices as shareholders in public companies to hold firms to high moral standards. Shareholder activism for social change was born in 1971 when then-Presiding Bishop John Elbridge Hines showed up at a General Motors shareholder meeting with a message from the church: we want this company, in which we own a stake, to stop doing business in apartheid South Africa.

Now Episcopal organizations with funds to invest are embracing new strategies and tools with hopes of confronting what some regard as corporate-driven crises in public safety and the environment. With such moves come new opportunities for investment and influence, along with new levels of resistance from industry lobbyists.

For the first time, the Episcopal Church this year began investing a small portion of its $478 million portfolio for the sole purpose of advocating as shareholders. In compliance with a 2018 General Convention resolution, the church bought at least $2,000 worth of stock (the minimum required to sponsor a resolution) in three manufacturers of firearms: American Outdoor Brands, Sturm Ruger & Co. and Olin Corporation.

The goal, according to the GC resolution, is for Episcopal entities “to do everything in their power to minimize lethal and criminal uses” of guns. In October, Executive Council instructed Treasurer Kurt Barnes to file shareholder resolutions calling on gun makers to promote restrictions on guns and ammunition sales, conduct background checks and make guns safer through technology.

“You’re not buying it for any fiduciary purpose” when the church buys a gun stock, said Paul Neuhauser, a member of Executive Council’s Committee on Corporate Social Responsibility and an active participant in Episcopal Church shareholder activism since 1971.  “You’re buying it to effectuate a policy position as to what the church should be trying to do in society. That’s why it’s so different.”

But a rising tide of shareholder activism on gun safety and other issues could soon be curtailed as regulators face pressure from industry groups to reign the movement in.

The Securities and Exchange Commission (SEC) is expected to propose in November new rules that would make it harder for shareholders to petition for new corporate behavior vis-à-vis any number of issues, from governance to climate change to the opioid epidemic. Higher threshold requirements would deliver on pleas from industry groups such as the U.S. Chamber of Commerce. They would also mark a setback for the Episcopal Church Office of Government Relations among others who have been calling on the SEC to keep the current rules.

A higher bar for participation “would be a means to make it impossible to file a shareholder resolution,” said CCSR Vice Chair Brian Grieves. “It’s an attempt to try and do away with socially responsible investing.”

The church’s new strategy on gun makers, who used to be screened out of socially responsible portfolios, underscores just how far faith-based, socially responsible investing has come.

In the 1970s and 80s, faith-based investors focused largely on keeping portfolios free of “sin” stocks by screening out weapons manufacturers along with defense contractors, tobacco, alcohol and gambling stocks. Shareholder advocacy was in practice limited to a small handful of issues and largely confined to companies that investors already owned.

Today the universe of “sustainable, responsible and impact” (SRI) investments in US markets has swelled to $12 trillion, or one-quarter of all professionally managed assets in U.S. markets. That’s up 38 percent since 2016 and 1700 percent rise since 1995, according to a 2018 report from the U.S. SIF Foundation. The Episcopal Church and Trinity Wall Street have been among those forging shareholder coalitions through the Interfaith Center on Corporate Responsibility (ICCR).

Fueling the mainstreaming of SRI is mounting evidence that investors can prosper while also doing good via their portfolios. A 2019 study by fund tracker Morningstar analyzed the financial performance of 56 funds that were screened according to environmental, social and governance (ESG) criteria. Conclusion: 73 percent have outperformed their non-ESG equivalents since inception. Proponents of ESG investing say positive screening criteria help weed out risky and poorly managed companies.

“The important shift over the last decade or so is that ESG investing can produce returns that are comparable to traditional portfolios,” said JoAnn Hanson, president and CEO of Church Investment Group, a nonprofit that uses ESG criteria in managing $92 million for Episcopal entities. “You’re not asking an investment committee to sacrifice returns.”

Avoiding bad actors is still part of the strategic mix. Example: at its October meeting in Montgomery, Ala., Executive Council created a Human Rights No Buy List of companies (Motorola, Caterpillar, Israel Discount Bank) that reportedly do business with “illegal settlements” in Israeli-occupied territories and/or with the Israel Defense Forces.

But although years of dialogue with those companies proved unsuccessful, the Church still owns shares in other firms (Facebook, Trip Advisor and with hopes of persuading them to distance themselves from Israeli projects with questionable human rights records.

“Our focus has been on engagement rather than boycotting or divesting or sanction,” says Episcopal Church Treasurer Kurt Barnes in a short new video from the Church Pension Group. The Palestinian-led Boycott, Divestment, Sanctions movement (BDS) seeks to put financial pressure on Israel and has been accused of using anti-Semitic rhetoric and narratives.

In practicing shareholder engagement, faith-based investors need to be comfortable with profiting from enterprises that some regard as morally suspect. Example: if gun sales spike next year and Sturm Ruger’s stock soars, the Episcopal Church will now share in the gain.

But business ethicist Robert McNulty sees no problem with owning stocks with hopes of swaying policies to impact society for the better. Investors with relatively few shares in public companies should still have a voice in how they’re run, he said. And Christians can look to Jesus’ example to justify associating with the corporate world’s “sinners.”

“Jesus said we should be praying for our enemies,” said McNulty, director of programs at the Hoffman Center for Business Ethics at Bentley University. “He was never one to say, ‘we’re so pure that we should never associate with them.’ Here he was down in the trenches with the tax collectors and the prostitutes to the great disdain of the Pharisees and the religiously powerful of his time. … He did it because he said heaven will celebrate for every sinner that we bring on the right path. This is the whole story of the prodigal son. So if this is a prodigal son strategy, go for it.”

SRI investing hasn’t caught fire church-wide. Some of the 200 members of CEEP Network (Council of Endowed Episcopal Parishes) structure their investments as fiduciaries to seek only financial returns, not to drive social change via the companies in their portfolios, according to Executive Director Joe Swimmer. They regard investments as tools for generating resources whose impact will be felt later in ministry initiatives, he said.

Like parishes, dioceses don’t always bring their financial clout as investors into annual shareholder meetings or corporate boardrooms. For example, several dioceses have inquired about how to take part in shareholder engagement with gun makers, according to CCSR Chair and Diocese of Western Massachusetts Bishop Doug Fisher. But he’s not aware of any that have actually bought shares, according to an email from Diocese of Western Massachusetts spokesperson Vicki Ix.

“I’ve always been disappointed that there’s not more response from dioceses and parishes” to collaborate on Episcopal Church shareholder initiatives, Neuhauser said. “They say, ‘Oh yeah. Yeah, fine.’ But they don’t actually do anything.”

Still, resources are proliferating to help organizations that want to advance their Episcopal values via their endowments. Examples:

  • The Diocese of Connecticut is piloting a “Values Investing Fund” to help Connecticut parishes invest in companies that “have acted in a way that is consistent with Episcopal values” according to environmental, social and governance (ESG) criteria.
  • Church Investment Group offers active portfolio management within an Episcopal value system for parishes, dioceses and other Episcopal-affiliated entities. Since 2016, those with at least $500,000 to invest also have had access to two CIG funds: one that has no fossil fuel holdings and one that invests in all industries and seeks to improve policies and practices according to ESG criteria. Entities with more than $15 million to invest may have separately managed accounts.
  • In September and October, the Church Pension Group hosted events in Washington, D.C. and Seattle respectively to educate Episcopalians on the power and promise of shareholder engagement tactics. Upcoming panels on the same topic in 2020 are planned for Atlanta (April 28), Chicago (June 25) and San Diego (Sept. 22).

As SRI strategies continue to evolve, Neuhauser warns against wider usage of the gun industry strategy, prescribed by General Convention, to start buying shares for the sole purpose of swaying corporate policies. To bring that approach to other industries could have a detrimental effect in his view.

“As a policy matter, I don’t think it’s a good idea,” Neuhauser said. “It lends support to those who want to get rid of shareholder proposals on social issues because you’re not acting as a shareholder. You’re acting on other motives.”

Meanwhile existing tools remain underutilized. CCSR members say they hope dioceses and parishes will take steps to be heard inside the boardrooms of companies they already own. Proxy voting season begins early in 2020 as annual shareholder meetings convene. Dioceses and congregations can learn how to align their investments and proxy votes with those of the Episcopal Church by contacting CCSR. Neuhauser said interested parties may email him at


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