Investors spread faith-based word

Sister Patricia Wolf remembers the embryonic days of faith-based shareholder activism.

"In the 1970s and '80s, when the movement was about 10 years old, our approach was to file a shareholder resolution, you hoped for dialogue with the company, you probably didn't get it ... then you went to the annual meeting and hoped for 3 percent of the vote," she said.

"Today, 50 percent of our work is in dialogue with corporations. ... If we receive 3 percent of the vote [on a resolution], we're disappointed."

Wolf is the executive director of the Interfaith Center on Corporate Responsibility, a coalition of 275 faith-based institutional investors, including Roman Catholic, Protestant and Jewish groups.

Its members are pushing scores of shareholder resolutions throughout corporate America this annual meeting season, and engaging in behind-the-scenes discussions with countless companies, as they try to capitalize on heightened attention to corporate behavior in the wake of months of headline-grabbing scandals.

Shareholder activism on all fronts is mushrooming in this post-Enron era, with a marked jump in the number of shareholder resolutions filed this year on a variety of subjects, from HIV in Africa and global warming to separating chairman and chief executive positions and expensing stock options.

Faith-based investors have positioned themselves to play an increasingly influential role on social and corporate governance issues, and various leaders of the movement said corporate responsiveness has increased noticeably--although not universally--in recent years.

"What I think has been a great opportunity is that we've had a set of tragic circumstances that have proved what socially responsible investors have been talking about for decades," said Mark Regier, stewardship investing services manager for Mennonite Mutual Aid in Goshen, Ind., whose mutual funds and shareholder advocacy efforts promote, in part, the pacifist tradition of denominations with Anabaptist roots.

Companies are learning, he said, that ethical practices directly affect the bottom line, and executives cannot be motivated solely by self-interest.

"If you only rest on that, you really do send yourself down a river that will really bite you," he said.

Behind this intensifying push are years of experience and good-size portfolios. Members of Wolf's ICCR have roughly $100 billion in combined assets, including more than $10 billion at the Evanston-based General Board of Pension and Health Benefits of the United Methodist Church.

Their frequent allies, socially conscious mutual funds, meanwhile had record investment inflows last year, according to data from fund-tracker Lipper Inc., adding $1.5 billion, to more than $17 billion.

Shareholder advocacy by faith-based investors takes many forms.

Perhaps foremost is screening.

Many faith-based investors decline to invest in companies involved in alcohol, tobacco, gambling, armaments or pornography. Islamic investors, including the prominent Azzad Asset Management funds, extend this to avoiding interest-based businesses, including banks and insurers, plus bonds and Treasury bills.

Once they invest, their strong social justice traditions have led many to engage companies over the years on such issues as investment in South Africa, global labor and human rights standards, pay disparity and living-wage proposals, drug affordability and diversity issues.

Aside from meeting with companies and sponsoring resolutions, faith-based groups also advise investors on how to vote on other shareholder resolutions pending across corporate America.

Amid heightened concern about corporate governance issues, many experts have seen a blurring of those issues with the social issues that historically concerned faith-based investors.

The influential Methodists' General Board, for example, has for many years focused on improving board diversity at companies in which it invests, said Vidette Bullock Mixon, director of corporate relations and social concerns. It also is sponsoring resolutions this year on financial analyst independence and separating chairman and CEO positions.

"From our vantage point, we've always concluded that a company that has high standards and good practices on the social side, they're probably going to have good corporate governance," she said. "We've always seen the tie-in."

Bullock Mixon and other experts said firms are becoming more responsive in this climate of scandal and shareholder mistrust, but say it is a continuation of a longer-term trend in which shareholder advocates gained legitimacy and experience, rather than a sea change.

"I think, for the most part, the hostility we used to get 15 to 20 years ago has been replaced by a willingness to meet and talk," said Rev. William Somplatsky-Jarman, the associate for mission responsibility through investment at the Presbyterian Church USA. "Through that, many companies see that our real interest is in improving their ability to compete ... as well as enact social improvements."

Indeed, part of faith-based investors' increasing success has come from greater experience in how business works, and their role as significant, long-term shareholders.

"We try to position ourselves as reasonable. We try to address issues in a reasoned manner, rather than confrontational," Bullock Mixon said. "We want to work with companies. We want to hold them accountable, but we want to have a good-faith dialogue."

"Who we meet with makes all the difference in the world," Wolf said. "If all they send is a lawyer, then you're in trouble. ... We meet with people who have a direct reporting relationship to the CEO. Otherwise, they're entertaining us."

Faith-based advocates said they have worked to increase the sophistication of their efforts, with Wolf stressing the importance of high-quality research to link the issues to bottom-line results.

Those efforts, Mennonite Mutual Aid's Regier said, have helped to eliminate the perception that these investors are "the freakish fringe."

"One of the things that we have learned is that the social, humanitarian and moral concern that we bring as people of faith must be brought together with the financial realities," he said.

With that savviness, of course, comes a rare passion.

"The people who come to this work are deeply committed to it, because it's about long-term change," Wolf said. "The companies have come to understand that."

Advocacy efforts

Here are some examples of shareholder resolutions filed with companies by faith-based investment groups:


TOPIC: Report on space-based weapons

SPONSOR: Franciscan Sisters of Mary, St. Louis

COMPANY: Cooper Industries

TOPIC: Report on sustainability

SPONSOR: Dominican Sisters of Springfield, Ill.

COMPANY: Delphi Automotive Systems.

TOPIC: Global set of corporate labor standards

SPONSOR: Benedictine Sisters, San Antonio

COMPANY: General Electric

TOPIC: Costs of PCB contamination

SPONSOR: Sisters of St. Joseph of La Grange, Ill.

COMPANY: J.P. Morgan Chase

TOPIC: Report on pay disparity

SPONSOR: Sisters of St. Francis of Dubuque, Iowa


TOPIC: Ethical criteria for patent extension

SPONSOR: Sisters of Charity of Cincinnati


TOPIC: Report on AIDS impact

SPONSOR: Mennonite Mutual Aid


TOPIC: Report on greenhouse gas emissions

SPONSOR: General Board of Pensions and Health Benefits of the United Methodist Church

COMPANY: R.J. Reynolds Tobacco Holdings

TOPIC: Program to warn of environmental smoke risks

SPONSOR: Catholic Health Initiatives

COMPANY: Yum Brands

TOPIC: Sustainability report

SPONSOR: United Church Foundation

Note: Many resolutions have several sponsors; Methodist General Board, for example, is also a sponsor of the Delphi resolution.

SOURCE: Interfaith Center on Corporate Responsibility; Securities and Exchange Commission filings