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The divestment iceberg

The General Council just sold $6 million in fossil fuel shares from its treasury fund. Will the United Church’s pension fund, foundation and congregations follow suit?

By Mike Milne

Four months after General Council voted to “take active steps” to divest church holdings in fossil fuel companies, a United Church investment committee sold off all of the oil-soaked shares in its $100-million treasury fund.

The shares, worth $6 million, were previously invested in some of the world’s top 200 fossil fuel producers. The treasury fund’s investment committee had planned to divest the shares by the end of 2015.

As the first such divestment by a Canadian denomination, the sales are significant — and controversial. Given the backlash from some church members and from volunteer church investment experts, the committee’s action could be considered relatively swift. But from another perspective, a $6-million sell-off represents only the tip of the United Church’s potential divestment iceberg.

Along with congregations, three groups hold most United Church-related investments: the treasury fund, the foundation and the pension fund. General Council and its staff control the treasury fund but can only encourage — not order — the managers of the pension fund and the foundation to divest. Each group has its own volunteer investment committee, professional investment advisers and fund managers. All three also take advice from a recently formed Responsible Investment Reference Group.

The $56-million United Church of Canada Foundation still holds $1.7 million in fossil fuel investments (see foundation sidebar, page 39). And the $1.4-billion church pension fund is in the process of determining the amount of its fossil fuel holdings (see pension fund sidebar, page 38). Communities of faith, including congregations, have about $542 million invested. It’s anyone’s guess how much of that money is in fossil fuels.

Research and debate on the issue is far from over as the various arms of the church respond, investment experts weigh their options and professional investment firms find increasing interest among United Church members in fossil fuel-free investments.

The North American fossil fuel divestment movement began in earnest in 2010 when a small U.S. liberal arts college decided to sell its endowment’s investments in coal mining. Inspired by author and environmentalist Bill McKibben and his 350.org organization, divestment campaigns have since spread to hundreds of colleges, municipalities and institutional investors. The 350.org campaign lists the prime targets: the top 200 coal, oil and gas companies based on the potential climate impact of their reserves.

The decisions at General Council last August have their roots in the Climate Justice Group at Toronto’s Trinity-St. Paul’s United. After months of research, the congregation decided in 2014 to divest fossil fuel investments from its $510,000 portfolio, ask the United Church’s treasury and foundation to do the same, and ask the pension fund to calculate its fossil fuel holdings.

Members of the Trinity-St. Paul’s group include former Greenpeace executive Jeanne Moffat, retired General Council staff and anti-apartheid veteran Rev. Jim Kirkwood and math professor Walter Whiteley, a former member of York University’s pension board. They spread the word through webinars and workshops, shepherded divestment proposals through Toronto Conference and encouraged similar proposals from British Columbia, Manitoba and northern Ontario.

Christine Boyle, a Vancouver-based community organizer who also helped build support for divestment, says the motions made sense, especially to young people, at a time when “it didn’t feel like there was anything people could do, beyond buying different kinds of light bulbs and driving less.”

The divestment opponents — including most investment committee volunteers — are not against action on climate change. They argue corporate behaviour can be more effectively influenced through shareholder activism. It’s a way to retain profitable investments while encouraging environmental and social change.

As a shareholder, the church can make or support proposals on the ways companies do business, or it can discuss company activities with management, a process called management engagement.

The church used to do more of that work through a now-defunct task force. These days, church investment committees work mainly through a corporate advocacy contractor.

Arguments against divestment today are almost identical to those heard during the mid-1980s, when United Church anti-apartheid activists urged the church to sell holdings with links to South Africa. Pro-divestment activists today often quote South African Archbishop Desmond Tutu, who says boycott and divestment movements were the key to bringing down apartheid.

But Bill Davis — then United Church finance chief — argues that much anti-apartheid work was accomplished through corporate engagement. By the time the church finally sold all its South Africa-related investments in 1986, it “was kind of a token gesture,” he says.

The United Church has long avoided so-called sin stocks: alcohol, tobacco, gambling and pornography. Today, responsible investment principles are used to consider most church investments. As a signatory to the United Nations Principles for Responsible Investment (UN PRI), the church has agreed to screen its investments for environmental, social and governance factors.

As part of a UN PRI-related commitment called the Montreal Carbon Pledge, the church treasury recently completed an evaluation of its equity investment portfolios for “carbon intensity.” It showed that even before the treasury sold its shares in fossil fuels, the investments were about 40 percent less carbon intensive than comparative stock index holdings.

Ian McPherson, chair of the United Church treasury investment committee, believes this kind of analysis and engagement works better than outright divestment. The investment committee, he adds, “is not afraid “to rock the boat” and question corporate management.

While debate over the pros and cons of divestment continues, United Church chief financial officer Erik Mathiesen says, “Re-investment decisions will take longer because frankly there aren’t a lot of green investment-grade alternatives.” The treasury already has five percent of its holdings in a clean air and energy fund through Swiss-based Pictet Group, but Mathiesen says this was its worst-performing investment in the past five years. Fiera Capital, one of the United Church’s investment advisers, is prepared to offer a fossil-free alternative if enough investors get on board. Trinity-St. Paul’s United’s new investment counsellor, Genus Capital Management, offers fossil-free portfolios that aim to provide healthy returns.

Jeanne Moffat of Trinity-St. Paul’s United admits divesting from fossil fuel producers “is not going to change things overnight.” But she says it will “signal to those big companies that they’ve lost the social licence to continue operating ‘business as usual,’ as if there is no tomorrow. Because we know that if they do that, there is no tomorrow.” 

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