Environmental, Social and Corporate Governance
A More Responsible Way to Manage Businesses
There is a growing recognition that financial performance is strongly linked to sustainable business practices. Environmental, social and governance issues (ESG) are coming forward as important considerations for investors and corporate managers.
The reason is simple: a company that considers ESG an integral part of its operations and strategy is more likely to perform well over the long term, because it reduces risk and cost while increasing efficiency and competitiveness.
We have been a leading advocate and practitioner of ESG based investing for many years. In 2006, the United Nations invited us to co-author (along with 25 other leading practitioners of responsible investing practices) its Principles for Responsible Investment, asserting the importance of ESG issues in investment decision making. There are more than 1,300 signatories to the initiative, representing approximately $34 trillion in assets.
Wespath sees the growing importance of ESG as affirmation of our belief that corporate responsibility and long-term performance are not mutually exclusive but are complementary. We embrace ESG in our investment strategy not just because it is right or good, but because it is an integral element of sustainable business practices and ultimately, profitability.
We believe that:
- Sustainable investing should be a proactive, positive force, rather than the widely-held view that it relies solely on the negative, exclusionary screening of so-called "sin stocks."
- We can influence corporate behavior through the encouragement of responsible actions, because a steadfast focus on ESG can help make a company’s stock more desirable and profitable.
Encouraging Desirable Corporate Behavior
Our sole obligation is to act as a prudent fiduciary, managing the investments of our participants in a manner consistent with the Social Principles of the United Methodist Church. Promoting ESG issues in the companies in which we invest serves both parts of our mandate – to generate good returns while honoring the values of the organization we serve.
Our activities include:
- Shareholder Engagement — Engaging management by promoting sustainable business practices that consider the impact of ESG policies.
- Proxy Voting and Shareholder Resolutions — Wespath utilizes respected proxy advisers to help us analyze issues presented to shareholders for voting, and also file shareholder resolutions. We exercise our votes in a manner that promotes long-term sustainability.
- Public Policy Engagement — We collaborate with like-minded organizations and officials to influence public policy as it affects the rights and long-term interests of shareholders.
- Investment Screening — We do not invest in companies that derive significant revenue from gambling or from the manufacture, sale or distribution of alcoholic beverages, tobacco-related products, adult entertainment, weapons, or the management or operation of prison facilities.