As environmentally conscious investors consider how to slow climate change and mitigate its effects, faith-based groups are among the leaders pressing for divesting from fossil fuels.
According to Arabella Advisors‘ 2018 Global Divestment Report, 29% of the nearly 1,000 organizations divesting from oil, gas, and coal companies are faith-based organizations located around the world. Faith organizations represent the greatest share of divesting institutions, above philanthropic foundations (17%), governments (15%), educational bodies (15%), and pension funds (15%). By Arabella’s count, 138 faith-based organizations have joined the divestment movement since 2016.
This makes faith-based organizations a noteworthy member of the wider community of investors removing fossil fuels from their portfolios. According to Arabella, investors with a total of $6.24 trillion in assets under management have committed to fossil fuel divestment, a significant increase from $52 billion four years ago. When measured in terms of assets up for divestment, the insurance industry leads, with commitments to divest $3 trillion in assets, while sovereign wealth funds and pension funds are also major players. Despite its top position in terms of numbers of divesting institutions, assets under management at faith-based organizations committed to divesting represented only $24 billion in Arabella’s 2016 divestment report.
The divestment campaign aims to move fossil fuel companies to adopt policies that support the 2015 Paris Agreement on climate change, which called for action to keep the rise in global temperatures below 2 degrees Celsius from preindustrial levels. According to the Arabella report, some of the reasons investors have been increasingly divesting from fossil fuel companies may include grassroots momentum, the financial and fiduciary cases for divestment, and what some have seen as the limitations of shareholder engagement strategies.
Divestment among Faith-Based Organizations
Among the 138 faith-based organizations to join the divestment movement is a group of 40 Catholic organizations that announced a divestment plan in October 2017, the largest joint announcement to date. Catholic organizations became increasingly active on climate change issues following Pope Francis’s 2015 encyclical, Laudato si’, which called on Catholics to live more sustainably.
But investors of many faiths have made moves toward divestment.
The Church of England, which is part of the international Anglican communion that includes America’s Episcopal Church, voted in July 2018 to divest its £12 billion ($15 billion) investment fund from fossil fuel companies if they have not aligned their operations with the Paris Accord by 2023.
An organization of Christian theologians called Operation Noah began the Bright Now campaign in 2004. This initiative calls on churches and individual members of the Christian community to agree to fossil fuel divestment, debate the ethics of investing in fossil fuel firms, and use their resources to support the development of clean alternatives to fossil fuels, such as solar and wind power.
In addition to divesting from coal and tar sand companies in 2015, the Methodist Church voted in 2017 to divest from oil and gas companies that have not solidified investment strategies meant to achieve the goals of the Paris Agreement by 2020. “Churches have an opportunity and responsibility to demonstrate moral leadership, to protect the poorest of the world, and safeguard God’s creation for the future,” Rev. Richard Byass said at the 2017 Methodist Conference.
Finally, while Jewish groups have moved somewhat more slowly than other faith-based organizations, one Brooklyn synagogue withdrew its savings from JPMorgan Chase in spring 2018 “to explicitly oppose the funding of fossil fuel and other related projects dangerous to the world in which we live,” becoming the first US synagogue to publicly divest from fossil fuels.
Divestment vs. Engagement: A False Choice?
Not all churches have decided on a policy of divesting from fossil fuels. For example, the US Presbyterian Church’s annual convention in 2018 voted to continue a policy of shareholder engagement with corporations that produce or consume fossil fuels rather than divest the church’s pension funds. It had voted four years earlier to begin thinking about selling its fossil fuel shares.
In the 2018 proxy season, faith-based groups also brought forward numerous resolutions at annual corporate meetings requesting more proactive and transparent policies regarding climate change. For example, the US Presbyterian Church, Mercy Investment Services, and Dignity Health urged the Valero Energy Corporation to develop a business plan mapping out how efforts to limit climate change would affect its business.
The question of whether to engage or divest has been debated among faith-based groups for several years. Some argue that engagement has produced few concrete results and that divestment is more effective at putting pressure on company boards. But the Arabella report suggests that organizations have begun to view shareholder engagement and divestment as two parts of a “joint strategy” rather than as opposing options. Whether they choose engagement, divestment, or a combination of both, these faith-based groups and individual investors are using the tools available to them to help bring about positive change in the environment.