by Colette Nies*
The General Board of Pension and Health Benefits of The United Methodist Church (GBPHB), and its Wespath investment management division, today announced the implementation of two new investment guidelines. These guidelines provide direction for identifying and managing the excessive sustainability risk that could potentially affect the value of assets held on behalf of benefit plans and institutional investment clients. One guideline relates to climate change (focused on the thermal coal sector); the other relates to human rights (focused on companies operating in some of the most challenging countries and conflict-affected regions in the world).
Sustainable Investing and Risk
Investors increasingly recognize that certain environmental, social and governance (ESG) issues (climate change and human rights among them) can present an excessive degree of sustainability risk to the prudent management of investment funds. Ensuring sustainability—in terms of financial performance and with consideration for the importance of ESG factors—is integral to GBPHB’s investment philosophy.
GBPHB General Secretary and Chief Executive Barbara Boigegrain noted, “We firmly believe that our comprehensive sustainable investment strategy will positively impact outcomes for our participants, the environment, society and future generations. The implementation of these guidelines demonstrates our commitment to active ownership as an important element of our investment program.”
As a long-term investor in nearly 5,000 companies, GBPHB’s active ownership strategy focuses on identifying and engaging companies whose securities present a fiduciary risk to plan participants and institutional investors, due to the companies’ unsustainable business practices. GBPHB believes that constructive engagement on ESG issues—taking advantage of its privileged position as a significant global investor—is the most powerful tool for effecting corporate change.
New Investment Guidelines
The GBPHB board of directors approved the two guidelines for implementation in 2015. GBPHB’s Chief Investment Officer David Zellner explained, “Climate change and the protection of human rights are two specific issues that can affect company performance and our investment returns. They are also important issues for members of The United Methodist Church, participants in the benefit plans and other stakeholders. The new guidelines are intended to influence our engagement priorities, but they may also lead to the exclusion from our investment funds of securities of certain high-risk companies until the risk of holding them has been mitigated.”
GBPHB’s Managing Director of Sustainable Investment Strategies Kirsty Jenkinson further commented, “Our climate change guideline focuses on companies operating in the carbon-intensive thermal coal industry, and our human rights guideline focuses on companies operating in high-risk areas—where business activities may contribute to human rights violations. We believe our approach can help us fulfill our fiduciary obligations while also creating positive change for people and the planet.”
*Colette is the managing director of Communications for the GBPHB.