wfn.org | Episcopalians: Corporate scandals increase interest in socially responsible investments

[dmack@episcopalchurch.org]

October 4, 2002

2002-226

Episcopalians: Corporate scandals increase interest in 
socially responsible investments

by James Solheim

(ENS) The recent spate of corporate scandals, and the questions 
they raise about business ethics and governance, has increased 
interest in socially responsible investments, according to 
participants in a recent conference in Massachusetts. The 
Episcopal Church's Social Responsibility in Investments 
Committee (SRI) joined with the Church Pension Fund (CPF) and 
the dioceses of Western Massachusetts and Vermont in a 
groundbreaking conference September 14 in Williamstown that 
could change the stewardship strategies of those who invest the 
church's resources.

According to the Rev. Brian Grieves, director of Peace and 
Justice Ministries for the Episcopal Church, "the vision for the 
conference belongs to Joyce Austin, chair of the SRI committee." 
He said that the conference could be "the beginning of a new 
model to make the experience available to the rest of the 
church."

Austin expressed a hope that the conference would serve as "a 
springboard for the future." Both she and Grieves noted the 
cooperation of the CPF, which recently filed a joint resolution 
with the Executive Council for the first time in history. "This 
partnership is very gratifying," he said. "But this is just the 
beginning. We must also help individuals make socially 
responsible investments."

How do we invest?

"How can we be faithful followers of Christ with our 
investments?" asked Bishop Gordon Scruton of Western 
Massachusetts in his opening comments. He suggested that every 
Christian should write a "money autobiography" showing when and 
how their convictions developed over the years.

Scruton admitted that "in the parish I didn't talk about 
money--certainly didn't preach about it." Then he attended a 
conference where he learned that the most frequent theme of 
Jesus was the kingdom of God--and the relationship to material 
possessions. "What we think about and do with money--that's 
right at the heart of the message of Jesus and how we relate to 
God and to our neighbors," he said. In the Old Testament 
practice of "gleaning," grain or grapes were left for the poor 
in an effort to share the abundance of the harvest. He said that 
the question for Christians today is, "Out of our own gratitude 
to God, how do we invest so that the poor always benefit, so 
they are blessed?" 

What's good for society?

"We are learning that what is good for business is not 
necessarily good for society," said Professor Kai Lee of 
Williams College, who heads the nation's oldest collegiate 
program in environmental studies. While businesses are intended 
to earn profits, the question becomes how they account for the 
content and distribution of those earnings. "Can we hold 
corporations responsible for their behavior?" he asked. "Are 
they acting well?"

Kai said that corporations today face what he called "a 
double bottom line--social and financial." When corporations do 
not act responsibly, their reputations and therefore their 
profitability can be seriously affected.

Churches have been very active participants in the movement 
for social responsibility in investments that grew out of the 
Vietnam War and the anti-apartheid movement in South Africa. 
Since the 1980s mutual funds have been screening potential 
investments, sorting out the bad from the good. They have also 
engaged in reform, petitioning for changes in corporate 
behavior. And they have sought to make investments that serve 
broader environmental and social purposes, "doing something for 
future generations," he said.

Socially responsible investments are likely to expand, Kai 
argued, but "the results are mixed." The movement has given 
shareholders a voice and it can claim success on avoiding 
investment in guns and tobacco but "diminished trust may make 
investors more suspicious" of making bad investments as they 
balance social investment and financial performance. "Yet 
capitalism is an awesome force for transforming life," he said.

Money can corrupt

Amy Domini of Boston, who started the original socially 
responsible mutual fund, was for a long time a lonely voice on 
the investment committee of the Church Pension Group. In her 
presentation, she said that her mutual fund has sought to buy 
better companies, be better owners and neighbors--seeking 
dialogue with management. "Those are the interlocking factors 
for any socially responsible investment strategy," she said.

Speaking as an Episcopalian and former member of the SRI 
committee, Domini pointed with some pride to the foundations of 
the movement when Presiding Bishop John Hines went to a 
stockholder meeting of General Motors in 1971 and, with the help 
of Paul Neuhauser of Iowa, called for it to withdraw from 
business in South Africa, where it was the largest international 
investor.

The whole purpose of the SRI movement, she said, is to find 
ways that corporations can "build a better world" because "the 
way we invest builds the world we live in." The Domini Index 
began by eliminating investments based on religious objections 
in such areas as alcohol, tobacco and gambling. "Then we looked 
at military and nuclear power," she said. That eliminated 200 
companies on the Standard and Poor's list of 500. The Index then 
devised a 100-question survey that included "markers of 
corporate behavior."

One of the major barriers to participation in the movement is 
the mentality that allewges it is the wrong way to foster change 
in society, Domini observed. "But corporations are creations of 
society so we can have some control." She said that finance and 
business is "the strongest force on the planet. So what happens 
when it goes out of control--and who fixes it? Not government, 
not management but the shareholders who created it and must 
restore it."

Domini said that "corporate scandals can have a beneficial 
effect because the American public begins to see the underlying 
structural, systemic problems, the corruption of power. And 
money is a powerful corrupting force." Yet fallout from the 
scandals "could encourage and give momentum to greater 
transparency--exactly what we have been arguing for--more 
screening of investments and curbing of runaway greed."

Barton Jones, general counsel for the Church Pension Group, 
described the decision to divest from Philip Morris. Originally 
CPG asked Morgan Stanley to find alternative, equally 
remunerative investments, 
but that was difficult so CPG decided to sell anyway.

Early-warning system

Two principles have guided the SRI movement since the early 
70s--more information is better so shareholders can make 
informed decisions, providing ethical guidelines exist for the 
business role of religious institutions, according to Prof. 
Harry van Buren, who teaches business at the University of 
Northern Iowa and serves as consultant to the Episcopal Church's 
SRI committee.

He offered examples of times when filing resolutions has led 
to dialogue and dialogue has led to change. "Sometimes 
confrontation is necessary but dialogue is often more effective. 
Often good things happen," he said. While shareholders "can have 
an influence out of proportion to the shares they own," van 
Buren expressed dismay at the "remarkable failure of the church 
to influence business ethics." However, he cited the "remarkable 
evolution in what the Pension Fund is doing and they should be 
encouraged to expand their efforts."

"We are not alone, we are working in collaboration and 
partnership with others," said Lindsey Parker, a lawyer from 
Boston and a participant in a panel discussion. She said that 
the Episcopal Church was one of the founders of the Interfaith Center for 
Corporate Responsibility (ICCR), a coalition of about 275 
faith-based organizations with over $110 billion under 
management. 

"This movement is like an early-warning system, dealing with 
issues that will become prominent in the future," said van Buren 
in echoing comments attributed to Tim Smith of ICCR. The 
movement also identifies related issues. Apartheid, for example, 
raised issues of labor relations and economic justice, how 
workers were treated. "Financial industries are the driving 
force in the world so we must look at the links among the 
institutions," he said. "How can we help them be more 
responsible?"

A teaching moment

Corporate scandals were also on the agenda for an ICCR 
symposium in New York. "Understanding the task of corporate 
governance in terms of ensuring that all of a corporation's 
stockholders benefit is not just an ethical imperative, it also 
makes good business sense," van Buren said during his 
participation in a panel discussion on September 19.

He argued that all stakeholders, not just shareholders, "take 
a risk in helping a corporation achieve its goals. The employees 
of Enron who invested their skills with the company took a risk 
that ultimately did not pay off and in the process lost their 
livelihoods and their retirement security," he said. 

Van Buren also cited the risk some communities take in 
hosting companies that pollute and workers who risk their health 
in dirty and unsafe plants. "Companies and corporate boards at 
the very least owe disclosure about such risks to their 
stakeholders," he said. He pointed out that  ICCR and its 
members "have sought to ask questions about the content and 
process of corporate decision-making," trying to influence the 
debate about the ethical responsibilities of corporations.

Raising the issue of corporate governance and ethics is "a 
natural extension" of the commitment of religious institutions 
to the "inherent worth and dignity of every person and 
community," van Buren added. "As tragic as recent corporate 
scandals have been for many shareholders and other stakeholders 
alike, this is a real teaching moment that should not be lost."

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--James Solheim is director of Episcopal News Service.