Advocacy is a central part of our overall investment strategy. It is one of the most important ways in which we take action to achieve our financial and social goals, and is integral to the maximization of value for our investors.
We advocate not just because it is morally right to do so – but because sustainable business practices make for more stability, greater profitability, less risk and a better world. Advocacy serves our long-term investment interests while also honoring our social values.
Our values are influenced by our history and the principles espoused by Methodism’s founder, John Wesley. Our commitment to these principles and our practice of responsible advocacy go hand in hand. This guidance is outlined in the Social Principles and The Book of Resolutions of The United Methodist Church. They provide a direction for all of our investment activities.
We have identified the following as deserving special attention:
- Sustainability Reporting – analyzing and communicating ESG business practices in a systemic fashion
- Environmental Practices – including climate change, water issues, and sustainable food
- Social Impact – including employee relations, human rights, and supply chain management
- Health – including the distribution of medications and drugs to treat disease
- Corporate Governance – accountability and transparency in management practices
Shaping a Better World and Delivering Strong Returns
There is an increasing awareness that environment, social and governance (ESG) factors can have a material impact upon corporate financial performance, as well as the stability and sustainability of the company. For this reason, it is wise for companies to analyze the impact of their business practices in relation to ESG factors, and that investors should also take them into account when considering risk and long-term investment viability.
Sustainability reporting is the means by which companies demonstrate their ESG compliance to investors while also providing an incentive and guidance to improve business practices. For this reason, we advocate for the adoption of sustainability reports and actively provide feedback to corporations drafting these reports.
The diminishing store of natural resources creates daunting and ongoing challenges for companies. Increased costs, decreased output, inability to achieve long-term sustainability and tighter regulatory standards are but a few of the risks.
Good environmental practices also have a positive impact on shareholder value. Companies regularly report significant cost savings after implementing environmental management programs, with benefits that can amount to tens of millions of dollars.
In recognition of the implications for shareholders, we advocate for action on many environmental issues. For example, we encourage companies to publicly report their efforts to:
- Set goals to reduce greenhouse gas emissions
- Improve water and energy efficiency
- Reduce waste
- Support a safe and sustainable food system
Good labor practices produce much more than social benefit; they are an essential factor in shareholder value and risk management. Competitive advantage can be gained or lost through a company’s management of its employees, its relationship with the communities in which it operates, and the standards it applies to its supply chain partners.
Accordingly, we call upon companies to monitor and report on policies and programs designed to:
- Promote equal employment opportunity
- Respect human rights
- Implement codes of conduct for suppliers and global facilities
- Encourage community development and responsible corporate citizenship
Many of Wespath’s corporate dialogs regarding health have addressed efforts by pharmaceutical companies to distribute drugs to treat HIV/AIDS, Tuberculosis, Malaria, and other neglected diseases in low and middle-income countries (LMIC). We also have asked companies to give serious consideration to the financial impact these diseases have on business operations.
The numbers are sobering. According to UN data, nearly 2 million people die each year from AIDS, 1.8 million from tuberculosis, and 1 million from malaria. The majority of these cases are in sub-Saharan Africa, where access to life-saving medicines is limited.
As a result, the effect on human capital may be significant – not only in employee turnover rates due to infection and death, but as disease claims the lives of teachers, nurses, and parents, there are fewer adults to raise and teach the children. As education levels decrease, the available pool of qualified workers is reduced.
Accordingly, Wespath advocates for:
- The availability of medications to those in LMIC who need them
- Workplace policies that stress education, prevention and nondiscrimination based on medical status
Historically, corporations have operated with very little scrutiny from shareholders or the general public. However, recent corporate failures across many industries – attributed in part to lax corporate governance standards – have resulted in calls for greater corporate accountability and more transparent governance.
We advocate strongly for sound corporate policies because of the importance good governance has on long-term stability and investor trust. We believe that:
- Boards of directors should reflect the diversity of our society and include more women and ethnic persons
- Directors should stand for election each year, and should be elected by majority vote
- The majority of directors, as well as the board chairperson, should be independent of company management
- Directors should have sufficient knowledge of the industry in which the company operates
- Corporate political contributions should be publicly disclosed