The pope's call to action on global warming is unleashing a new
wave of shareholder activism by Roman Catholic investors.
This spring, as Pope Francis prepared his 183-page encyclical
calling for a phaseout of fossil fuels, several Catholic
institutions in the U.S., including universities and religious
orders, began taking steps to dump stocks with heavy exposure to
coal and other greenhouse-gas-emitting energy sources.
They also urged companies ranging from Bank of America Corp. and
Kraft Foods Group Inc. to DuPont Co. to disclose more information
about their carbon emissions and the environmental impact of their
businesses.
Catholics, who number more than one billion world-wide and
account for the largest organized religion in the U.S., control an
estimated $150 billion in assets, according to Daniel Nielsen, a
director at Christian Brothers Investment Services, a Chicago
investment-management firm.
The encyclical, which calls global warming a major threat to
life on Earth and urges "urgent and compelling" steps to halt it,
is "a wake-up call that climate change is a crisis," Mr. Nielsen
said.
The papal letter, titled "Laudato Si: On Care For Our Common
Home," is an in-depth discussion of the church's teachings on the
subject. It was published June 18, but the Vatican announced it
more than a year in advance, and many Catholics were sympathetic
with its goals.
Sister Nora Nash, a nun with the Sisters of St. Francis, outside
of Philadelphia, who serves as her order's director of corporate
social responsibility, thinks the encyclical will help her keep up
the pressure on companies in its portfolio for more environmental
disclosures.
"Our earth is fragile. In the heart of the corporate world, we
feel that we, too, can make a difference," she said.
The septuagenarian nun met with Chevron Corp. representatives in
mid-June to urge the company to release more information about the
hydraulic fracturing, or fracking, it does in her state, and its
impact on the region's water.
"Every part of our area is being pipelined to death," she
said.
A spokesman for Chevron said, "We value their input, as well as
the input of other stockholders."
At the largest 250 U.S. companies, Catholic groups have
submitted 12 environment-related shareholder proposals this year,
up from seven in 2014, according to Proxymonitor.org, a website
sponsored by the Manhattan Institute's Center for Legal Policy, a
public-policy research group.
The movement has yet to produce major environmental policy
changes at American companies, or to evolve into a coordinated
campaign, but it is chipping away at the margins.
Among this year's proposals, religious investors asked companies
to produce reports on sustainability and climate-change risk, to
create targets for greenhouse-gas emissions, or appoint a director
with environmental expertise.
The Sisters of the Holy Names of Jesus and Mary, who operate
mostly in the U.S. and Canada, asked Bank of America in May for a
report on climate change.
The bank opposed the request, saying in a proxy filing that a
report detailing emissions and risk across all of its lending,
investing and financing activities would "require considerable
resources without conveying useful information." It said it already
discloses greenhouse-gas emissions from its U.S. electric utility
portfolio, and pointed to other reports, policies and procedures to
address climate-change risk.
A Bank of America spokeswoman declined to comment.
Another religious order, the Missionary Oblates of Mary
Immaculate, asked Kraft to produce and release a "comprehensive"
sustainability report "describing its environmental, social and
governance performance and goals, including greenhouse-gas
reduction goals."
At shareholder meetings in late May, the Sisters of St. Dominic
of Caldwell asked Chevron and Exxon Mobil Corp. to provide better
information on carbon emissions. That same month, another New
Jersey-based order, the Sisters of Charity of St. Elizabeth, asked
fellow shareholders of chemicals maker DuPont to support a
resolution that the company monitor the herbicide farmers used with
its crop seeds.
The companies opposed these proposals, saying in their proxies
that the information was available elsewhere, or that its
publication wouldn't be a good use of corporate resources. Holders
of between 5% and 30% of the companies' shares outstanding voted in
favor of the measures.
DuPont declined to comment beyond its filings. Kraft didn't
respond to requests for comment. Exxon sent company representatives
to meet with Vatican officials in May to discuss global warming, a
spokesman said.
Catholic investors have increased their environmental efforts in
corporate boardrooms since late last year, when the pope indicated
he would release the encyclical ahead of United Nations climate
talks in Paris set for late 2015.
"There is more pressure on Catholic investors to divest fossil
fuels," said Father Michael Crosby, whose religious community in
Milwaukee holds about $2,000 in Exxon shares. "You have to either
get out, or do something to get these companies to diversify their
business models."
At Exxon's annual meeting in May, he asked Chief Executive Rex
Tillerson "to get an expert on the board" to advise the company on
renewable energy.
Renewable energy "only survives on the backs of enormous
government mandates that are not sustainable," the CEO responded.
"We on purpose choose not to lose money."
Mercy Investment Services, the investment arm of the Sisters of
Mercy, said it raised social issues at more than 140 companies this
year, either directly or through shareholder resolutions. It said
about a third of these efforts focused on environmental
matters.
Under guidelines from the U.S. Conference of Catholic Bishops,
Catholic institutions traditionally avoid companies that, among
other things, produce tobacco or weapons of mass destruction or do
stem-cell research.
As many as 30% of public companies already fail the most
rigorous application of these standards, said Jason Baron, who
helps clients of Bank of America's U.S. Trust unit build portfolios
that meet their individual social responsibility standards. Equally
rigorous screening for carbon emissions would put 12% to 15% of
more of them off limits.
Of course, attractive returns are still a goal for Catholic
funds. "We don't help people sleep at night by ethically losing
money," Mr. Baron said.
Because each institution brings its own interpretation of church
doctrine to its portfolio, each investment thesis is unique,
according to James Ryan, an adviser with Merrill Lynch's Private
Banking & Investment Group.
Catholic investors looking for ways to succeed both financially
and ethically might simply sell off stocks they find
environmentally questionable.
At a June 5 meeting in Dublin, the managers of the Oblate
International Pastoral Investment Trust, which oversee $400 million
in assets for more than 200 Catholic organizations, voted not to
invest in resources or utility companies heavily involved in
thermal coal and oil sands.
The group may expand its blacklist in coming months, said Father
Seamus Finn, the trust's head of global advocacy work.
"The encyclical adds a universal call from the church that
hasn't been there before," he said. "This is an urgent, moral
responsibility."
After the encyclical's release, Greg McIntire, portfolio manager
for the SEI Catholic Values Funds, which oversee $170 million in
assets in Pennsylvania, began making plans to factor a company's
carbon footprint into its investment decisions for its clients.
Georgetown University, one of 225 U.S.-based Catholic colleges
and universities, with a $1.4 billion asset pool as of June 2014,
said last month that it would no longer invest in coal
companies.
American Coal Council President Betsy Monseu said institutions
decide to sell off shares of coal companies for a variety of
reasons.
Write to Emily Chasan at emily.chasan@wsj.com and Maxwell Murphy
at maxwell.murphy@wsj.com
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