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Fossil Fuel Divestment, General Assembly 2014
General Assembly 2014 Event 338
This report is part of a longer event. Go to General Session IV for the complete video and order of business.
THE MODERATOR: Well, I'm going to invite our distinguished financial advisor here to facilitate a conversation about the Fossil Fuel Divestment Business Resolution. And he has some folks with him to help him do this. So give it up for Larry Ladd. Excuse me.
AUDIENCE: —the title of the resolution three.
THE MODERATOR: Yes, I recognize the delegate at the procedural microphone.
AUDIENCE: I'm Howard Schroder from the UU Church of the Restoration in Philadelphia. I have trouble with the title of resolution three. I suggest it should be "escalated."
THE MODERATOR: It is out of order to be editing—
AUDIENCE: —because escalating sounds like we are advocating that which we are not.
THE MODERATOR: We will have an opportunity later, should we wish to pull this up, OK?
THE MODERATOR: Thank you. Larry, are you ready to have this conversation?
LARRY LADD: If my technical staff has been successful, and it appears that they have been, we are going to have a panel discussion about the discernment process the UUA board went through to endorse the proposed business resolution on fossil fuel divestment that is on the agenda of the general session Saturday at 2:15. So I urge you to come to that general session, listen to the discussion, and vote. The purpose of this session is to help you learn how the board reached the decision it did to support that resolution. It could have been neutral on the resolution, it could have been against the resolution, but it voted in favor of this specific wording for that resolution.
So we have a panel to talk with us this morning. It includes me, as the UUA financial adviser. It includes Julian Sharp, who is a UUA trustee serving his second term. He was a youth trustee before he served his current term; Tim Brennan, who is the UUA's chief financial officer; and Kimberly Gladman, who serves as a member of the UUA Investment Committee and co-chairs the UUA Socially Responsible Investing Committee.
So even though each person has a text and a set of notes, we're going to try to make this seem as spontaneous and conversational as it can be. [LAUGHTER] So I'm going to start by asking Julian how he heard about this business resolution.
JULIAN SHARP: Thank you, Larry. And thank you for your leadership on this issue. Well, I have been engaged with this topic for some time, as have many Unitarian Universalists in the United States, Canada, England, and elsewhere. I first heard about this business resolution during the October 2013 board meeting. When this assembly passed a resolution at last year's gathering to begin a conversation about divestment within our communities and congregations, I sensed that action would soon follow.
What is inspiring about this decision to support this resolution on the part of the UUA board is that it is consistent with the historical commitment the UUA has made it to support and engage with movements for social justice. On this, the 50th year anniversary of the Selma to Montgomery march, and 30 years after UU ministers and students begin to address the terrors of apartheid in South Africa, partially through divestment, we are presented with what may be described as the greatest threat to the welfare of humanity that we have ever confronted. I am proud to be a member of this board and proud to be a member of this movement, because we have always taken a stand and worked to create a better world for future generations.
LARRY LADD: And now I'm going to ask myself a question. [LAUGHTER] It's a good spiritual practice. [LAUGHTER] There are—Larry? Yes? Are there—what are the three forms of socially responsible investing?
There are three basic types, and the UUA has, for four decades, really, used all four types to align our assets with our values. I mention this specifically because some folks who get to the mic, knowing you as I do, may think this is the first time we have taken a stand to change the world, and this resolution is that stand. This will be an important statement, but it is not the first time.
So the first type is called community investing. And that is making loans, for the most part, to low income housing and other purposes like that. Actually, a part of our community investing is supporting the Lucy Stone Cooperative in Boston, where a group of young adults are living together.
So it is essentially sort of positive investing. When it was set up by the board in 1970, most of that money went into banks owned by African Americans that were investing in the community. Over time, the names of the banks that we owned changed from Community Freeman's Bank of Roxbury to Bank of America and places like that, as these large banks gobbled everything up. But we've continued to be able to move those assets into a positive direction.
The second is called screening. There's two kinds of screening. There's positive and negative screening. Positive screening is actually very similar to community investing, in that you're finding companies that are doing good things—consistent with our values—and you're putting your money in that. We do some of that.
And then there's negative screening, which is screening out companies that do bad things, inconsistent with our values. And we do some of that, as well. And again, have done that since the early '70s.
And lastly is what's called shareholder activism—or has a variety of other terms, but shareholder activism is the most common—where we own shares and influence the behavior of companies through the use of those shares. We go to annual meetings and raise hell. And there's actually nothing that corporate America hates more than people who come to the annual meetings and raise hell. Half a percent of votes can scare them into changing their behavior. It's really quite remarkable how that comes to pass.
And that's actually, if you look at our history, our oldest, longest term strategy. And that started with a vote in 1967 at General Assembly. It's called the Kodak Resolution. And if you Google that, you'll learn about that first initial stand this General Assembly took for using our endowment assets for good.
And now, I'm going to turn to my notes to see who gets the next question. I know it's not me. Kimberly, can you describe briefly how the Investment Committee and Socially Responsible Investing Committee incorporates our values into their decision making process?
KIMBERLY GLADMAN: Yes. Thank you. So as Larry and the folks up here know, I work professionally in the field of responsible investment, as do a number of the members of those two committees.
And I think one of the reasons that we are so happy to volunteer our time with the UUA is that the UUA is absolutely world class in the field of responsible investment, and has been for a long time, before I got here, [APPLAUSE] or even was a UU. So really—and far out of proportion to our size, right? We have $175 under management. In the world of big institutional investors, that's actually small. But we fight so far above our weight, it's incredible.
So what that means right now is that 70% of the portfolio is subject to some kind of social, environmental screen. We have especially stringent criteria for energy companies, and we were out of coal long before Stanford. We just forgot to make a big deal about that, because we are too modest.
We are involved in all sorts of shareholder advocacy initiatives. As Larry said, we are raising hell all the time. And Tim here is the main hellraiser. He doesn't look like it, but he actually is. And Simon Billinous, who is with us, another one of our volunteer hellraisers who does an enormous amount.
And we have a permanent allocation to investment in poor communities, in micro-finance, in co-housing, and the kinds of things that Larry talked about. So what that means specifically, when you turn to the issue of climate is—number one, you should know in terms of screening, we have 2.9% of the portfolio currently in the carbon tracker 200 companies that the resolution is talking about, compared to about 9%, on average, for the market, for just people in general. We also have been involved in—well, the thing that I forgot to say is we also pester our managers that we hire.
People should understand, we on the committee are not picking the companies to invest in. We're hiring asset managers who we hire to do that for us. But we grill them on how do they look at social and environmental issues, how do they look at carbon risk, how do they look at carbon valuation? So we're proud of the fact that we're steering our money and our business to managers who are thinking in a much more thoughtful way about those things then the average bear out there. So that's one of the reasons that we are underweight already in those companies.
And we're doing a ton of advocacy on these issues that is not only getting companies to be more transparent—talk about carbon, talk about emissions—but actually reduce how much carbon they are putting into the air. And I hope that Tim is going to talk, in a little bit, about what Tim did—and others on the committee—this year with Oasis Petroleum, that is leading to reductions in actual carbon emissions—less carbon going into the air—which is what we all want. [APPLAUSE]
LARRY LADD: Thank you, Kimberly. That's a good introduction. Tim, can you describe our shareholder advocacy work?
TIM BRENNAN: Sure. By the way, that Eastman/Kodak Resolution was co-filed with TIAA-Cref and United Church of Christ, and it was the first ever shareholder resolution—The first. One.
KIMBERLY GLADMAN: Really?
TIM BRENNAN: Yeah. Yeah.
KIMBERLY GLADMAN: Oh, wow. I didn't know that. That's great, too.
TIM BRENNAN: Well, the first thing to understand about shareholder advocacy is that shareholders drive change when they work together. We don't do this alone. We do this in coalitions. So we are a member of the Investor Network on Climate Risk, and we're a member of the Interfaith Center on Corporate Responsibility, which is the main network of faith-based investors around shareholder advocacy.
Together, these two organizations literally represent trillions of dollars. They have real power together. These days, shareholders are putting resolutions on the ballots of annual corporate meetings on topics like political spending, corporate lobbying, executive compensation, and climate change.
The UUA votes every single one of those. So it's hundreds of companies and a dozen or more issues on every single ballot. So we're talking about thousands of votes. We cast votes on every one of those in line with UU values. And if I could, I'd like to give a couple of examples of shareholder action.
This year, the Investor Network on Climate Risk that I mentioned before filed 150 resolutions on climate change. Many of those resulted in negotiated settlements with the companies. As Larry said, the companies don't like these coming up at the annual meeting. They don't like them in their proxies. And because these issues are getting large votes—20% 30%, 40%—they sit down and negotiate these issues.
We filed about seven this year. One of them was the one Kimberly referenced—Oasis Petroleum. So we filed a resolution around fugitive gas emissions.
And what they committed to in our negotiation was to connect 90% of their wells with the technology that allows them to capture all that fugitive emission, and that's a big number. And they can also committed to report back on how they're doing next year, against that goal. [APPLAUSE] And the second is a campaign we've involved with a lot of shareholders on, going after the American Legislative Exchange Council.
AUDIENCE: Yeah! [APPLAUSE]
TIM BRENNAN: Their most recent effort is to get states to pass the Electricity Freedom Act. And what that means is overturning renewable energy standards in each state. So a bunch of shareholders have been going to companies and trying to get them to quit. And so far, 80 companies have resigned from ALEC, cutting off their revenue stream.
Yeah. And the UUA took on two companies—Visa and GlaxoSmithKline. And both of those companies agreed to quit ALEC And as a—[APPLAUSE] as a result of this, this effort to overturn the renewable energy standards is going pretty much nowhere. We've got a lot more work to do, but it is dead in its tracks right now.
LARRY LADD: This is a watershed moment, when the chief financial officer gets lots of applause. [LAUGHTER] He will cherish this. [LAUGHTER] I have one more question for Tim. You may have heard me say the board of trustees endorsed this specific wording of the resolution. The wording is very important, and so I'm going to ask Tim now how this wording came to be.
TIM BRENNAN: Well, as has been mentioned—as Julian mentioned—last year, you'll recall there was an Action of Immediate Witness on the issue of fossil fuel divestment, calling for discernment and for congregations to consider that. And that was proposed by a group that was really led by Terry Wiggins out of Milwaukee congregation. And coming out of Louisville, we've—[APPLAUSE] Yeah.
LARRY LADD: Let's hear it for Milwaukee. [APPLAUSE]
TIM BRENNAN: So coming out of Louisville, we began a whole process of conversations with Terry and the other proponents for the resolution. They were already planning a business resolution at that point. And that led to a meeting in Boston. I think it was in November, and it was convened by and facilitated by Reverend Fred Small, from our Cambridge congregation. [APPLAUSE]
Yep. Yay, Fred. And out of that, we—oh I should say also, at the meeting was the UUA Ministry for Earth, which we're delighted to have as part of the process. So that group was able to agree on language that made a strong statement on climate change while preserving our ability to use our ownership position to press companies.
Tom Bean—wherever Tom is—Tom Bean, our general counsel, was also involved and advised on how to address the issue of fiduciary duty. So in the end, we came to a common agreement on a resolution that's the one that's in your book, that recognizes the urgency of the issue of climate change, it protects the fiduciary role of the investment committee, and it enables strong shareholder advocacy. [APPLAUSE]
LARRY LADD: Thank you. So now we'll actually get to the April board meeting. And so I'm going to start by asking—at that meeting, we invited a variety of people to come and share information and advice with us. We invited the investment committee—the Socially Responsible Investing Committee—UUs for Divestment, in a number of others. So I'm going to ask Kimberly what the Investment Committee and the Socially Responsible Investing Committee advised the board.
KIMBERLY GLADMAN: —-shared with the board. Well, we basically summarized some of what Tim said about the process that we went through. And we gave them the context of what we know, as professionals in the field, is going on in terms of fossil fuel divestment in general.
And we could really say that this resolution is much more thoughtful, more careful, more thorough, and likely to be more effective, I believe, than really anything that any peer organization is doing or that anybody else is doing in the field on this issue. And we told them how much we valued the process that had been gone through, and how much we valued those results. And for me personally, it was really very moving because this is an issue that people feel so passionately about.
But I think from the beginning, everybody understood we were all on the same side. We all recognize the moral urgency of climate change, and we all want to do something. And we made this very careful process to make sure we integrated all those different perspectives and came to something everybody could feel very good about and support.
And I think, frankly, all of us have been in situations, especially in activist movements, where sometimes the people on the same side wind up fighting each other and bickering over details. And that didn't happen here. People really kept our eyes on what was important and did something that I think is very powerful. So that's what we shared with the board.
LARRY LADD: So now I'm doing to ask Julian who else was invited to the meeting and came out and what he heard from them.
JULIAN SHARP: Thank you. So aside from Kimberley and David Jackson from the Committee on Socially—
KIMBERLY GLADMAN: Stewart. David Stewart.
JULIAN SHARP: David Stewart—from the Committee on Socially Responsible Investing. We also heard from Carol McMullen, who's the chair of the investment. Committee. We heard from Terry Wiggins and Reverend Drew Kennedy from UUs for Fossil Fuel Divestment and Sustainable Reinvestment via Skype. And we also heard from Stephanie Leighton, an experienced SRI professional at Trillium Asset Management and a former member of the UUA Committee on Socially Responsible Investing. One thing I want to say is that we were able to learn about the work that these committees do—that your UUA committees—specifically the Investment Committee and the Socially Responsible Investment Committee—do, and it really is incredible. It's usually probably not flashy work, but it's so meaningful. And we all owe, I think, you all a depth of gratitude for managing our portfolio and our resources so well.
So we heard that divestment is an important moral issue. By the end of the board conversation, I understood that it does not make financial or moral sense to align or invest our limited resources in companies that are actively destroying the planet. Go figure. [LAUGHTER]
I learned that there is not a conflict between fossil fuel divestment and the board's fiduciary responsibility to achieve good investment returns. The resolution, as Larry mentioned, as currently worded, makes a real difference in the way our portfolio is managed, as well as a strong statement about fossil fuels that will send a message within Unitarian Universalism and beyond, to our political and business leaders. We also understood that—I heard that it's possible and desirable for Unitarian Universalists to come together to achieve multiple and complex objectives as embodied in this resolution. And significantly, I also understood the divestment to be one important step among many that we must take if we are to truly confront climate change and ensure that, literally, life on this earth can continue for generations.
LARRY LADD: So I'm going to close by asking myself one more question, [LAUGHTER] which is, what will happen if this resolution passes? And there three things will happen. Two things will happen, and then I'll give you an admonishment, I guess, is a better way to put it. What will happen is the Investment Committee and the board will be pushed and empowered further than they have been before to continue the kind of divestment that you heard Kimberly describe. Secondly, as an association—as a faith community—we will have made a very strong statement about fossil fuels and fossil fuel dependency.
But third, the admonishment is, remember that what really counts is what happens with the behavior of our congregations and each of us. I'm reminded of that when I looked at that the resolution that we passed—I think it's now 30 years ago—the women—no, a little bit more than that—1977—the Women and Religion Resolution. And I read that because I think it was yesterday that was the anniversary of that event. That resolution not only told the world it needed to change, but it told congregations and individuals that they needed to change.
So if you vote for this, do not use this as a proxy for changing other behavior. It is only a symbolic gesture. [APPLAUSE] It is an important symbolic gesture, but it is not enough. So we thank you very much for listening to this conversation. [APPLAUSE]
THE MODERATOR: And I thank you very much for taking us through that conversation. And I'll ask you all, how do you feel about these GA talks and these conversations with delegates?