Episcopal Church Leads the Way in Ethical Investing

Episcopal News Service. November 18, 1992 [92236]

Susan Pierce

When Episcopal Church Presiding Bishop John Hines appeared before a General Motors Corporation (GM) annual meeting in 1971 to present a shareholder resolution filed by the church requesting that GM stop doing business with South Africa, GM executives were shocked. This was not a wild-eyed radical -- this was an Episcopal bishop from a denomination in which many of them were members. It was the last place from which corporate America expected to be challenged about its business ethics.

Hines's prophetic voice challenged old assumptions in the corporate world by asserting the church's rights as a part owner of a corporation. His leadership gave birth to the socially responsible investment (SRI) movement. Since then, the SRI movement has grown into a powerful ecumenical chorus of religious groups using their power as corporate shareholders to make companies accountable for their actions and address social justice concerns.

Episcopal Church provides initial leadership

"Without the Episcopal Church's initial leadership, there would be no socially responsible investment movement," said Timothy Smith, executive director of the Interfaith Center for Corporate Responsibility (ICCR) in New York City. ICCR, founded the same year that Hines challenged GM, gathers information on corporate practices, analyzes investment portfolios and coordinates the filing of thousands of shareholder resolutions, dialogues and campaigns on issues ranging from South Africa to nuclear weapons manufacturing, and from equal employment opportunities to environmental protection. The organization was started by the Episcopal Church and a halfdozen other Protestant denominations, as a coalition of church shareholders. Smith has been part of the organization from the start.

Before the founding of ICCR, the Episcopal Church and a few others were the SRI movement, according to Smith. "In the early 1970s, it was a lonely voice in the corporate arena," he said. That lonely voice has a lot of company now. Smith noted that in two decades ICCR has grown to 250 Protestant church bodies and Roman Catholic orders and dioceses, with combined investments of $35 billion.

Episcopal Church is a model

As part of ICCR, the Episcopal Church led the way in the hard-fought but generally successful campaign to end corporate support for apartheid in South Africa over the last 20 years.

The campaign is emblematic of the church's perseverance and effectiveness as a moral leader, Smith said. "The Episcopal Church has served as a model. It is not just doing what's responsible and right. Its witness has a measurable impact on society," he said, noting that the campaign resulted in the withdrawal from South Africa by GM, IBM and scores of other U.S. corporations. These massive divestitures, plus other economic sanctions, are widely credited as a chief factor in the demise of the apartheid system in that country.

Many leaders of the anti-apartheid movement agree. At a banquet for ICCR's 20th anniversary held last November in New York City, Archbishop Desmond Tutu of South Africa voiced his appreciation for the churches whose involvement in ICCR helped end the apartheid system in his country. "We owe you an enormous debt of gratitude," Tutu told the 400 guests at the banquet.

Competence created trust

The success of the SRI movement within and outside the church is due, in large part, to the professional expertise of those Episcopalians involved in the movement, according to the Rev. Brian Grieves, the Episcopal Church's peace and justice officer, who is responsible for coordinating the church's socially responsible and alternative investment efforts.

"The competence of the Executive Council SRI committee created trust," Grieves said. "Because of this competence, and its care and cajoling, the Executive Council felt it was getting thoughtful, professional and sound proposals on investing the church's money in nontraditional ways."

The Episcopal Church is especially fortunate to have some of the top investment professionals in the country working in the church's SRI movement. Amy Domini, a private trustee at the investment firm Loring, Wolcott & Coolidge in Boston, is a nationally known leader in the field of socially responsible and alternative investments who has coauthored several books on the subject.

Domini said of SRI, "It's a practical and pragmatic way of witnessing to your faith while at the same time doing something that really shows results. I find it exciting that carefully targeted investments can really make a significant difference. Socially responsible investment is not some abstract notion; it is a real agent for change."

Doing well and doing good

Paul Neuhauser, an expert in stock market regulatory law and an Episcopal layperson, has been involved in the SRI movement and ICCR from the earliest days, when he was appointed to a commission by Hines. A professor of corporate law at the University of Iowa, Neuhauser had an interest in social justice issues from working in the civil rights movement.

"With alternative investments, it's very important to show that it's possible to take part of a stock portfolio and provide a positive return and a positive societal change. As in the old Quaker saying, 'We did well by doing good,'" Neuhauser said.

Neuhauser represents church groups before the Securities and Exchange Commission (SEC), the federal agency responsible for regulating stock market practices. He said that there has been a disturbing trend under the Reagan and Bush administrations of the SEC moving to reinterpret regulations in order to keep shareholder resolutions off proxy statements.

SRI is ecumenical movement

Despite corporate and government discomfort, the SRI movement has grown and spread out across many sectors of society, including an increasingly diverse group of organizations.

According to Bill McKeown, an attorney in New York City who works with nonprofit tax-exempt organizations and is involved in the church's SRI committees, the movement has "spread well beyond the churches to public pension funds, and has moved to broader issues, such as environmental concerns."

McKeown contended that the method of dealing with important issues with stockholder resolutions "is effective because it puts issues on the public agenda in a new way and makes people in corporations aware that their actions have social implications."

ICCR is an arena in which Protestant and Roman Catholic groups have worked together effectively and achieved substantial accomplishments, McKeown said. This ecumenical harmony is "another part of the story worth celebrating, because there are enough unnecessary divisions among denominations as it is," he added.

Alternative investment is practical strategy

"Shareholder resolutions and boycotts are important to influence those in power as part of the church's faith commitment, but so are alternative investments, which are basically putting our money where our mouth is," McKeown added. "Both are essential for the church, very practical ways to witness in social and economic systems."

Alternative investing is another place where the Episcopal Church has been a leader, according to Domini. She said that "wonderful things are happening" due to initiatives like the 1988 General Convention's so-called Michigan Plan, which calls for congregations, dioceses and the national church to invest in community redevelopment.

In Vermont, for example, a partnership between the diocese and community development loan funds has created jobs and housing, Domini reported. The Episcopal Church presently has over $7 million in alternative investments, such as community development loan funds and credit unions.

As for the future of the SRI and alternative investment movements, many observers suggest that concerns about the environment and equal employment opportunity have moved to the forefront.

Grieves listed issues that the Episcopal Church is tracking in its investments. "Militarism -- how much of a company's business is in militaryrelated contracts; representation of people of color and women on corporate boards of directors; environmental practices of corporations -- that's become the big issue in the last few years. And of course, South Africa will remain the flagship issue until the political situation is resolved," he said.