The responsible investment program provides for both principled purchasing decisions and active ownership strategies. It outlines a multi-strategy approach to implementation:
- stock screening
- ESG (environmental, social, and governance) integration
- targeted, themed, or impact investments
- proxy voting
- corporate engagement and advocacy
The program is a work in progress being implemented in the context of volunteer and financial resources available to the church for this work; responsible investment services in Canada that are themselves not fully developed; and the understanding that there will never be complete agreement in any group, including the church, on what constitutes an "ethical" or "responsible" approach to investment.
- Stock screening and ESG integration are implemented through the selection of fund managers best able to implement the church's policies, and these managers are accountable to the Investment Committee. Stock screening refers to negative screening from the investment portfolio of companies producing certain products (e.g., tobacco) and positive screening to invest in companies with the best overall records in their sectors of corporate social responsibility. ESG integration refers to the integration of environmental, social, and governance factors into the evaluation of the financial performance of companies.
- Targeted, themed, or impact investing is a variant of positive screening. The Investment Committee is open to such investment opportunities when they support the mission priorities of the United Church. The church already has social purpose investments in Oikocredit (lending to international microfinance and cooperative development organizations) and the Canadian Alternative Investment Cooperative (lending to Canadian organizations and worker cooperatives lacking access to traditional sources of financing for the support of disadvantaged peoples and the environment).
- Proxy voting services are provided by SHARE (Shareholder Association for Research and Education), a not-for-profit provider of responsible investment services. The investment committee is using model proxy voting guidelines provided by SHARE and reviews quarterly voting reports.
- Shareholder engagement is carried out to improve the level of information available to companies in which the church invests and to influence their responsible business practices. This is carried out through correspondence and dialogue with companies, or in some cases the filing of a shareholder proposal, independently or in collaboration with investor groups. The United Church has contracted with SHARE to participate with other SHARE clients in a program of engagement on a broad range of social, environmental, and corporate governance issues. SHARE issues annual and quarterly reports on its engagement on behalf of the United Church and other clients. SHARE also issues an annual plan for its engagement activities on behalf of clients.
What Are ESG Factors?
ESG stands for environmental, social, and governance factors. Socially responsible investors have focused on ESG criteria for decades, with the goal of aligning their financial activities with their social and environmental objectives and values. For example, investors have avoided companies producing alcohol, tobacco, and weapons, and companies involved in serious human rights and environmental abuses. They have also sought to invest in companies with good corporate governance practices such as processes for determining executive compensation.
More recently, many mainstream investors have begun to explore ESG integration, which refers to the incorporation of ESG criteria into investment analysis, based on the belief that ESG issues are a driver of financial returns. The depth and breadth of this interest in ESG factors can be seen in the growth of support for the UN Principles for Responsible Investment, which aims to help integrate consideration of ESG issues by institutional investors. Signatories to the Principles include asset owners (e.g., the Ontario Teachers Pension Plan, the Community Foundation of Ottawa), investment managers (e.g., TD Asset Management, BC Investment Management Corporation) and professional service providers (e.g., SHARE, the Shareholder Association for Research and Education). The United Church became a signatory in August 2014.