UUA Treasurer Tim Brennan
UUA Treasurer Discusses Socially Responsible Investing and Environmental Stewardship
April 17, 2008
Unitarian Universalist Association (UUA) Treasurer Tim Brennan traveled to New York City on February 14 to attend the Investor Summit on Climate Risk (ISCR). The third such summit in six years, ISCR was held at the United Nations Headquarters and co-hosted by the United Nations Foundation, the United Nations Fund for International Partnerships, and Ceres, an organization that brings together public interest groups, environmental groups, and investors to address sustainability issues such as climate change.
This year’s ISCR attracted hundreds of investors and culminated in the proposal of a climate-action plan endorsed by 49 different organizations, including the UUA. Those taking part in the one-day summit represented $8 trillion in assets. By comparison, all managed assets in the United States total $25.1 trillion, and nearly one in every nine professionally-managed dollars is involved in socially-responsible investing (SRI).
Before joining the UUA in 2006, Brennan served for nearly seven years as senior director of development and communications at Ceres, where he was involved with planning the first and second ISCR.
Brennan’s work as UUA treasurer includes a strong focus on SRI, with a new emphasis on climate change inspired by the 2006 UUA General Assembly statement of conscience. The statement of conscience reads, in part, “We as Unitarian Universalists are called to join with others to halt practices that fuel global warming/climate change, to instigate sustainable alternatives, and to mitigate the impending effects of global warming/climate change with just and ethical responses.” Brennan believes deeply in upholding this charge. Here he discusses how to put that belief into action through his work at the UUA.
Q: You’ve been with the Unitarian Universalist Association for almost two years. During that time, what have you brought to the UUA’s approach to socially-responsible investing?
A: I think what I have added has been the focus on climate change, and that was directly in response to the statement of conscience at the 2006 General Assembly (GA)—which was also my first day on the job. After GA, the Committee on Socially Responsible Investing (of which I am a member) took that statement of conscience quite seriously and started working on it immediately.
Q: What actions did the UUA take in response to the 2006 statement of conscience?
A: The first year we were the lead filer on a resolution with the hotel company Starwood, in which we asked that they improve climate risk disclosure on their website. We also co-filed at TXU, a power company.
On the Starwood resolution, the result was just what one would hope. The resolution did not go to a vote, and instead the company asked us to enter into a dialogue. We brought in investors and Ceres, because they provide good technical advice. Starwood agreed to our request, and we settled in writing. We were delighted. If it hadn’t been for the UUA’s involvement, we would not have had such a successful outcome.
In the case of TXU, they had announced plans to develop eleven coal-fired power plants with a huge level of emissions. The shareholders viewed that as adding risk to the company and they asked if this was really a wise strategy to invest the company’s capital that way. Institutional investors came in and bought out the company and decided to eliminate eight of the eleven coal-fired plants, which added value to TXU by decreasing environmental risk. The result was that the capital markets are driving the companies in the right direction—just what we’re looking for.
Q: So businesses are acknowledging that climate change can affect them?
A: That’s the fundamental, underlying premise of the Investor Summit on Climate Risk and the resolutions that we and other investors are filing—climate change represents a risk to the companies. Risk can be financial, regulatory, or physical, for example. These risks are embedded in the companies but hidden because they currently don’t have to disclose this information to investors. In just the last few years, companies like Goldman Sachs and Morgan Stanley have begun looking at climate change as a serious risk factor they need to consider in order to make wise long-term investments.
Addressing climate change is creating investment opportunities as well. For example, there was tremendous consensus from scientists, policy experts, asset owners, and money managers that we need a national policy that sets a price for emitting carbon dioxide. This opens up the market opportunity. Set the target price for emissions and make sure it’s a long-term policy, so that the capital markets can invest wisely.
Q: Though the long-term financial benefit is clear, is there a financial sacrifice for those choosing not to invest in heavily carbon-reliant businesses?
A: I think that when you start pursuing really long-term investment goals and you’re talking about huge pools of funds, such as with pension funds, the line begins to blur. Something like climate change or other issues—human rights or equal opportunity for employees, for example—these causes begin to align so that they are actually long-term investment issues. It’s not something that’s going to change the stock price in two months, but because these investors in it for the long term, taking in the social implications will lead to the stronger investments and benefit their portfolios more in the future.
The question really becomes, how are the individual companies addressing these risks? If you look at oil companies, some of them are actually investing in renewable energy sources because they see themselves as energy companies. Some of them factor in a cost of carbon emissions, and will assume that cost in their long-term capital spending decisions even though it is not yet the law. To say these companies shouldn’t exist isn’t wise, so let’s invest in those companies who are working on shifting away from heavy carbon emissions.
Q: Can you explain how socially-responsible investing works at the institutional level?
A: The UUA’s socially-responsible investing involves four different pieces:
Screening. While there’s not always an opportunity to screen every asset class (e.g. international mutual funds), with our US stocks the UUA engages a consultant to look at all the companies in Russell 1000 index, and the consultant score each company on a one-to-ten scale according to UU values. We try to favor companies with the higher scores and avoid companies with low scores.
Proxy Voting. With U.S. equities, we vote every single proxy question. That’s several thousand actual votes that we get to cast. We give specific instructions on dozens, if not hundreds, of issues, and our proxy voting service casts votes in line with the guidelines. We then get a detailed report on every vote.
Sometimes the UUA is the investor making proposals for inclusion on the proxy statement. For instance, we have filed shareholder resolutions asking companies to improve their practices on the environment, non-discrimination policies, and executive compensations. Even at $130 million, the UUA is a small investor. Therefore we work in collaboration with other SRI, religious and mainstream investors to build support for our proposals.
Community investing. The UUA makes community investments, some at below-market interest rates that pay 2 or 3 percent, though some pay market rate. By board action, one percent of our endowment fund goes into community investments like affordable housing funds, microfinance, or community investment pools. I would like to see the UUA do more of that in the future, too.
Q: How has the UUA handled these choices within its own socially-responsible investing?
A: We have steered away from companies who are not doing the right thing, and yes, you do take a short-term hit. Energy companies have really been driving the S&P 500 over the last year. The leaders had been oil and gas companies, and several of those companies we didn’t own. But you can’t think about that, because in the course of a market cycle, stocks are up and down, so it’s really not very meaningful to say we didn’t invest in oil and gas and took a hit. That’s why, from an investment perspective, the UUA tries to have a highly diversified portfolio. Over the long term, it balances out and you have a solid target return.
Q: Then how does socially-responsible investing work for individuals?
A: It would translate down to the individual through mutual funds. An investor can make the choice to put money into a fund that screens stock selection by socially-responsible standards.
Q: Are there resources available through the UUA for congregations to get more involved with socially-responsible investing?
A: I would say there are two things that can be done. Congregations can invest in the Unitarian Universalist Common Endowment Fund, which operates like a little mutual fund. With the UUCEF, congregations can invest their endowment funds along with the UUA and we all share equally the gains, losses, and costs. Funds are screened, proxies are voted, and there is shareholder advocacy.
Second, if they make community investments with their own funds, the UUA will match those investments up to $10,000 per congregation. We probably have 50 different congregations that have done that, and I’d love to see more. There’s information on UUA.org about approved investments, and there are hundreds of choices, such as the Calvert Community Investments, or New Hampshire’s Community Loan Fund. There are others that invest in international microcredit through the Foundation for International Community Assistance, FINCA, or Oikocredit. There are many possibilities for congregations to put their values into action.
For more information contact responsibleinvesting @ uua.org.
Last updated on Friday, April 18, 2008.
