Sisters lead the way in mission investing that influences corporate policy and advances social good

When ExxonMobil holds its annual meeting May 25, one of the proposals the corporation's shareholders will consider is acknowledging a "moral imperative" to address climate change and limit global warming to 2 degrees Celsius.

Planning to be at the meeting in Dallas is Sr. Patricia Daly, executive director of the Tri-State Coalition for Responsible Investing, which coordinated the more than 30 groups involved in social responsible investing that filed the resolution. Daly is also one of the Sisters of Saint Dominic of Caldwell, New Jersey, the lead filer.

She relishes the victory that brought the proposal this far after Exxon tried to quash it and a series of other shareholder resolutions, including on climate change and corporate governance. The Securities and Exchange Commission in March overruled the decision, saying the vote must take place. Also up for shareholders to vote on is a proposal by New York's pension fund to have ExxonMobil publish an annual assessment of long-term portfolio impacts of public climate change policies.

An ExxonMobil spokesman declined to comment on the issue, saying the company's response is in the proxy materials. The management recommends voting against all 11 shareholder resolutions.

"It's a typical tactic," Daly said of ExxonMobil's attempt to strike the shareholder resolutions. "They don't want to talk about limiting temperature increases to 2 degrees. They certainly don't want to talk about their moral obligation."

But getting corporations — including ExxonMobil — to talk about climate change, human trafficking, environmental policies and social justice is what Daly and many other women religious have been doing for decades.

Francis G. Coleman, executive vice president at Christian Brothers Investment Services, said women religious have been the driving force behind the socially responsible investing movement.

"They are not only the intellect behind it, but they bring the Catholic teaching that is the foundation behind it. They are the ones leading that fight," Coleman said. "They are a phenomenal, groundbreaking force. They are the reason the movement is where it is today."

Today, those efforts include divesting congregations' investments from industries such as mining and fossil fuels, making new investments in socially responsible enterprises such as inner-city development efforts and microloans, and working with corporations to reduce the environmental and social impacts of their operations.

Most religious institutes have divested from — or never purchased to begin with — corporations involved in activities such as mining or industries that contribute to climate change. So why do they hold stock in companies such as ExxonMobil? By purchasing a small amount of shares in a company, typically $2,000 worth, they have the same legal voice as other shareholders. This gets them to the table with firms they are targeting for change.

While the movement may have begun with the public confrontation created by shareholder resolutions, most of that dialogue today is neither public nor confrontational.

Leveraging influence together

The Tri-State Coalition for Responsible Investing is a member of the Interfaith Center on Corporate Responsibility, a coalition of nearly 300 faith and values-driven organizations, including faith-based institutions, socially responsible asset management companies, unions, pension funds and colleges and universities. Collectively, they represent over $100 billion in invested capital.

Susana McDermott, director of communications for Interfaith Center on Corporate Responsibility, said $100 billion is not a large amount in the investing world, but the group carries outsized influence.

"Very often, these faith-based members may not have the most enormous holdings in a company, but they walk in the room with the moral authority that only they can use," McDermott said. "They understand they have the moral authority and they have the right to speak from that perspective. And the companies value that voice. They value their opinions and the work they do."

Other activist investors have to be listened to, she said, but in a different way.

"The other type of activist investors, they have huge holdings, but they obviously have a completely different agenda: It's all about the cash at the end of the day," McDermott said.

It helps that the things sisters and like-minded investors push for are good for long-term profits.

"They're looking for the company to do the right thing not just for social issues, but for the business side as well," McDermott said. "When it comes to industries like banks, health care, pharmaceutical firms, they are at that table for years and years and years. They are about the long-term sustainability of those companies, as well."

Socially responsible investing has become important not just to faith-based investors, but to others who understand that issues such as sustainability and environmental effects impact long-term profitability — so much so that there are companies that specialize in providing what's known as Environmental, Social and Governance data, or ESG.

"It's become a very big business," McDermott said. "Even mainstream investors are looking at those metrics because they understand there's a real risk to the bottom line of those companies."

The Proxy Preview, a report on shareholder resolutions, found that 94 of the 370 resolutions filed this year were about climate change, up from 82 in 2015.

Also keeping companies at the table is the fact that socially responsible investors are willing to talk to management privately and actively listen to their concerns.

"Most of the work we do with companies doesn't even show up in the public," Daly said. "The vast majority is done in dialogue sessions. It's based on trust, it's based on confidentiality."

Daly said sisters involved in this work understand that a company cannot change policies instantly and cannot be expected to spend whatever is needed to make a change.

"We need to listen to the company for what they believe are the barriers to meeting our concerns," she said. "We don't demonize these companies. There are people in these companies that absolutely get it, and they see it as their vocation to turn these companies around. An example is human trafficking in the supply chain. No one is looking to defend this."

Through decades of work in this area, Daly said, sisters can help companies find solutions.

"A company might have seven different supply chains, so it's complicated," she said. "But most people who are trafficked into labor come from fee-based labor brokers, so they're essentially bonded slaves. So you can make a commitment to not use fee-based labor brokers. But that commitment doesn't happen overnight."

Making investments that do good for others

Listening is key in another area of the investment work sisters do: socially targeted investments, known as impact investing. Instead of buying shares to give them a voice with large corporations, they invest in other ways, such as making low-interest loans to community development efforts or organizations that may not have other access to capital.

Franciscan Sr. Nora Nash is the director of corporate responsibility for the Sisters of St. Francis of Philadelphia, who say they were among the first congregations to establish a policy on these types of alternative investments. Their work in the area began in 1985 and now includes aspects such as investing in the Disability Opportunity Fund, which finances organizations serving the disability market, focusing on affordable housing, schools and vocational training centers.

"We've been very pleased by our social impact loans over the past 30 years," Nash said. "We're really proud of our ability to continue to provide loans for organizations and communities who are disenfranchised or out on their own trying to establish a way to build a better community."

And while the stock market is widely considered to be the place to invest, Nash said that when the market crashed in 2008, it was the congregation's socially targeted investments that continued to perform, ensuring the sisters' mission could continue and that its retirement plan could stay afloat. Most of those investments, she said, are low-interest loans, so the income continued to be generated even as the stock market and economy seemed to fall apart.

Though they got into impact investing later, the Franciscan Sisters of Mary in Bridgeton, Missouri, have also become leaders in the field. John O'Shaughnessy, chief executive officer and chief financial officer of the order, spoke about the sisters' investments at a White House roundtable on the topic in 2014 and the White House Clean Energy Investment Summit in 2015.

O'Shaughnessy said the Franciscan Sisters of Mary prefer the term "mission investing" over "impact investing" because it is geared toward furthering the sisters' mission of being the loving, serving, compassionate, healing Jesus.

He said in 2009, the Franciscan Sisters of Mary realized that their guidelines for social responsibility were being met in terms of what they would not invest in — but not in the positive change they wanted to create.

"We said, 'We have a choice of actually doing it or changing our guidelines; otherwise, it's just window dressing,'" he said.

In researching the topic, he found a presentation on mission-related investing.

"I thought this was God speaking to us. It was exactly what we wanted to do," O'Shaughnessy said. "It was getting market-rate returns on things that actually had a social benefit and an environmental benefit."

The Franciscan Sisters of Mary have carved about 15 percent, or about $10 million, out of their portfolio for mission investments. Those investments have been earning roughly 4 percent a year, which exceeds their expectations, he said.

The money is invested in areas such as sustainable asset funds that focus on industries like conservation forestry, where timber operations harvest in ways that enhance the soil, water and wildlife rather than degrade them. Other investments include a company in Kenya that replaces household kerosene lamps with solar-powered lights that save money and don't burn fuel.

Christian Brothers Investment Services' Coleman said it is a myth that socially responsible investing comes at a cost of lower returns.

"Absolutely, definitively, without question, that is not true," Coleman said. "I can say without a doubt, without equivocation, that is false."

The socially responsible investing market is also bigger than many people think, he said, and growing. It now makes up about 20 percent of the market and continues to grow as financial analysts learn how these issues affect profitability.

"There's a cost to having poor environmental records, for example, and there are ways to quantify that cost that financial analysts understand," Coleman said.

Daly (of Tri-State Coalition for Responsible Investing) said most people may not think of the world of finance and investments as a traditional ministry, but that doesn't mean God isn't working there.

"It's probably the most profound way the Holy Spirit is working today. I've watched it in executives," she said. "Look at how far companies have come over the decades. These things are now integrated into the business plan. They're paying attention to the Earth and human rights."

Dominican Sr. Judy Byron, coordinator of the Northwest Coalition for Responsible Investment — a coalition of faith-based investors, mostly communities of women religious — in Seattle said while the movement may have started with confrontation in the 1970s, when sisters pushed corporations to divest from South Africa over its policy of racial discrimination known as apartheid, companies now appreciate what sisters can bring to the table.

She said sisters can often connect companies to others that have already found ways to solve issues, and executives now recognize that if women religious see something as an issue, it is something they need to take seriously.

She recalled that when, years ago, a member of the Northwest coalition filed a shareholder resolution with one company, its CEO immediately took the corporate jet to Spokane to meet with them and hear their concerns over the paper company's practice of bleaching wood pulp, which can release dioxin into waterways.

"It turns out that another CEO had told him, 'If the nuns ever bring anything to your boardroom, listen to them because in five years it's going to be a big problem,'" Byron said.

Sisters see issues on the horizon because they work with the people most affected by them, she said.

"It's about the people. The people being impacted by whatever the issue is — whether it's human trafficking, slavery, climate change — the people hurt by it are the ones that have no voice, and no power, and that's where sisters are," Byron said. "It's about systemic change. We're trying to change systems."

Byron said systemic change doesn't happen quickly, but it is happening.

"Martin Luther King said the arc of the moral universe is long, but it bends toward justice," she said. "We're in it for the long haul."

Activist investors say their work with ExxonMobil has turned into a public dispute because the company seems more intent on avoiding the issues. The corporation is under investigation into whether it knew about global warming and misled shareholders about its effects. Investors note that 10 other oil giants, including Total, Shell, BP and Saudi Aramco, support international agreements to limit global warming to 2 degrees Celsius, but ExxonMobil does not.

In its proxy statement against the resolution, ExxonMobil management says its view of addressing climate change "by no means represents a 'business as usual' case and it includes a significant reduction in projected energy use and [greenhouse gas] emissions due to energy efficiency initiatives." Instead of a self-imposed temperature limits, the company calls for a revenue-neutral carbon tax.

McDermott (of Interfaith Center on Corporate Responsibility) said faith-based investors would rather work with a company, but sometimes, that's not possible.

"There are times when a company is just not making progress, when they're just dragging their feet. That's when the stick comes out," she said. "The most common strategy is the shareholder resolution. Then it becomes public and the other shareholders are aware of it. It's a bit of an embarrassment for the company."

[Dan Stockman is national correspondent for Global Sisters Report. Follow him on Twitter @DanStockman or on Facebook.]