May 1, 2016
Addressing Climate Change: Investing in the Future of Our Planet
An ELCA Collaboration
- The ELCA’s 1993 social statement “Caring for Creation: Vision, Hope, and Justice,” followed by numerous issue papers, outlines God’s call to tend and advocate for the earth.
- The ELCA Corporate Social Responsibility (CSR) Table looks to ELCA social statements and issue papers to provide guidance on CSR activities.
- These documents and the CSR Table help guide Portico in its shareholder advocacy and proxy voting on behalf of ELCA investors.
- In the Social Purpose funds, Portico uses the ELCA Environment Screen and consults with the CSR Table to seek out opportunities to invest in companies taking positive steps toward a sustainable environment, and screen out companies causing harm to the environment.
2015 is officially in the books as the warmest year on record. The amount of carbon dioxide building up in the atmosphere is dangerously close to levels globally recognized as unacceptable. Recent United Nations-sponsored summits on climate change emphasize the need for a multi-faceted effort to address the issue.
For about 20 years, ELCA retirement plan investors have used their collective financial power and influence through Portico Benefit Services, the ELCA’s benefit ministry, to advocate for sustainable and environmentally-friendly business practices. In 2016, we’re stepping up efforts on three fronts.
1. Screening: Targeting Owners of Thermal Coal
Since its creation in 1990, the ELCA’s social criteria investment screen on the environment has been a key driver in shaping Portico’s social purpose fund investing. In 2014, the ELCA Church Council updated the screen to specifically cull out the “worst players,” such as companies with high EPA fines, multiple toxic spills, or certain fossil fuel companies. After approval by its board of trustees, as of January 1, 2016 Portico began to use this screen to identify companies that own thermal coal reserves and exclude them from future investment.
“Coal is the ‘dirtiest’ — most carbon-intensive — of all the fossil fuels,” Kurt Kreienbrink, Portico’s manager of socially responsible investing, says. “Screening out companies with thermal coal reserves ensures that future funds won’t be invested in companies owning a fossil fuel that inflicts serious damage to the environment.”
2. Shareholder Advocacy: Holding Companies Accountable For Their Emissions
Portico’s seat at the table comes to life through shareholder advocacy efforts benefitting shareholders and the environment. Over the past eight years, Portico has filed 84 shareholder resolutions with companies in which we are invested, seeking more transparent reporting on climate change risk management, setting greenhouse gas reduction targets, reducing carbon emissions, improving recycling efforts, and more, including some non-environmental topics such as diversity and human rights. Of those, we’ve been able to withdraw 47 resolutions due to constructive dialogue or positive action taken by the company. Such long-standing relationships have made it possible to measure progress.
“When we began shareholder advocacy on climate issues in earnest, we were simply calling on companies to offer basic reporting to make the issues and risks more transparent,” Kreienbrink says. “But more recently, we have been able to ask for more specific steps to reduce carbon emissions and more comprehensive analysis of opportunities to make changes that will have positive effects on the environment.” For example, a shareholder resolution filed with Costco in 2015 prompted the company to commit to keeping the growth of its greenhouse gas emissions to less than its sales growth over the next five years.
Portico currently has filed shareholder resolutions with five companies in which we are invested, calling for increased transparency in greenhouse gas production reporting and/or stricter emission standards.
While Portico sometimes files its own shareholder resolutions, we primarily partner with other organizations in order to create greater power and influence. Being a member of a number of environmental advocacy groups, like USSIF (the Forum for Sustainable and Responsible Investment) and the Investor Network on Climate Risk (INCR), creates a stronger voice that can affect legislation, education, and research.
3. Positive Social Investing: Putting Money in Cleaner Energy
Portico’s social purpose funds seek to invest a portion of the fund in companies striving to positively affect the environment, including those that develop or use sustainable energy and clean technology. Since 2013, Portico has been one of many investors in a Bank of America Green Bond that is funding transformative efforts across the country, including wind farms in Oklahoma and solar panels for a California school district.
In late 2015, Portico stepped up its positive social investing strategy through an increasingly popular form of investing called social impact first (SIF). SIF investments accept a somewhat lower projected return and/or somewhat higher projected risk in order to maximize the opportunity to make a positive difference in God’s world. That difference is tracked through measurable results, such as tons of CO2 emissions avoided, megawatts of renewable energy generated, or gallons of water conserved. Portico carefully looks for investments with demonstrated commitment to making a difference for the environment.
For example, we recently made a SIF investment in Impax Asset Management. Impax invests in corporations that employ measurable positive environmental strategies, such as Darling Ingredients, a U.S. firm that collects and recycles animal processing by-products and used restaurant cooking oil, and the Greenko Group, which owns and operates small hydropower projects and wind farms that generate renewable power in India. “Impax is a global stock investment manager that recognizes that climate change is a world-wide issue,” says Kreienbrink. “It is devoted to casting a wide net of impact by investing in companies around the world who are developing solar, wind, and water power generation systems, repurposing waste products, and reducing toxic emissions that harm the atmosphere.”