Issues of Concern
Based on the Wesleyan perspective that faith and practice go hand-in-hand, the Social Principles and The Book of Resolutions of The United Methodist Church address many of the complex issues facing society today. They provide the starting point for all General Board investing. Among the many issues they address, the General Board has identified the following as deserving special attention:
Unless otherwise indicated, all paragraph citations are from The Book of Discipline 2008, and all Resolutions are from The Book of Resolutions 2008.
Sustainability Reporting
Sustainability, a concept that is gaining wider acceptance in society, most commonly refers to “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” This is the definition developed by the World Commission on Environment and Development (sometimes known as the Brundtland Commission) in 1987. When applied to companies, sustainability involves conducting business so as not to negatively affect long-term viability, shareholder value, the environment or stakeholders (including consumers, employees and local communities).
Both investors and consumers increasingly are recognizing the importance of sustainability. Many companies have responded by improving their disclosure of business policies, practices, goals, opportunities and challenges related to environmental and social issues. A sustainability report provides a means for companies to report sustainability indicators and how they are addressing sustainability issues.
The United Methodist Church recognizes that “[c]orporations are responsible not only to their stockholders, but also to other stakeholders: their workers, suppliers, vendors, customers, the communities in which they do business, and for the earth, which supports them. We support the public’s right to know what impact corporations have in these various arenas, so that people can make informed choices about which corporations to support” (¶163).
Based on Church teaching and the belief that sustainable companies offer greater shareholder value, the General Board has filed resolutions with a number of companies calling for their development of sustainability reports.
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Climate Change
Not everyone agrees on how climate change takes place, but the scientific community overwhelmingly acknowledges the reality of global warming. Based on data obtained by the Global Atmosphere Watch of the World Meteorological Organization (WMO), an agency of the United Nations, atmospheric levels of greenhouse gases are the highest ever recorded. Greenhouse gases—primarily carbon dioxide, methane and nitrous oxide—are naturally occurring substances found in the earth's atmosphere that help regulate the earth’s temperature by trapping infrared radiation that has bounced off the earth’s surface.
Atmospheric levels of greenhouse gases have been increasing steadily since the Industrial Revolution. Emissions of carbon dioxide alone, largely through the burning of fossil fuels for energy use, have increased 35% since the late 18th century. Higher levels of greenhouse gases enable the atmosphere to absorb more infrared radiation, which increases the surface temperature of the earth and results in global warming.
Global warming is a serious environmental issue. In response, The United Methodist Church has declared its support of “social policies that...de-emphasize or eliminate energy-producing technologies that endanger the health, the safety, and even the existence of the present and future human and nonhuman creation” (¶160B).
In addition, the Church has called for the “control of global warming” (Resolution 1001.8), the support of “strenuous efforts to conserve energy and increase energy efficiency” (Resolution 1001.1), the United States to “move beyond its dependence on high carbon fossil fuels that produce emissions leading to climate change” (Resolution 1002.1) and “measures calling for a reduction of carbon dioxide, methane, nitrogen oxides, and sulfur dioxide, which contribute to acid rain and global climate change” (Resolution 1023).
Global warming and climate change pose special challenges to companies. Many companies contribute directly to global warming through greenhouse gas emissions, but all are susceptible to the effects of global warming. Anticipating how global warming and climate change may affect a company’s ability to operate in the future is a serious issue for shareholders. Accordingly, the General Board has filed shareholder resolutions calling upon companies to report on their response to issues relating to global warming and climate change.
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The Environment
Conservation of Resources
United Methodist statements on the environment are many and stem from the basic conviction that “[a]ll creation is the Lord’s, and we are responsible for the ways in which we use and abuse it” (¶160).
Recognizing the responsibility to support a more ecologically equitable and sustainable world, the Church has voiced its support for the:
- elimination of chlorine in the paper manufacturing process,
- reduction and control of industrial by-products and waste,
- maintenance and restoration of natural ecosystems,
- reduction of greenhouse gas emissions, and
- protection of water resources.
The General Board has engaged companies in dialogue over many types of environmental matters, asking for reduced waste, better management of resources and disclosure of environmental performance.
Water Management
The United Methodist Church recognizes that water “is an integral part of God’s radical expression of God’s love to all humanity. Water cannot be monopolized or privatized. It is to be shared like air, light, and earth. It is God’s elemental provision for survival for all God’s children together on this planet” (Resolution 1029).
Given that only 8% of all water used annually is for domestic households, while 23% is for industry and 69% is for agriculture, the Church “shall encourage and commit to good water management by all entities, corporations, and communities” and “shall push companies that pollute to provide funds and services to clean waters that they pollute” (Resolution 1029).
The General Board has challenged efforts by private companies to assume greater control of local water resources. We also have asked them to measure the impact of their operations on the local water table and to subsequently implement water conservation measures.
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Food Safety and Product Labeling
The United Methodist Church “support[s] policies that protect the food supply and ensure the public’s right to know the content of the foods they are eating,” and “call[s] for clear labeling of all processed or altered foods, with premarket safety testing required.” The Church also “oppose[s] weakening the standards for organic foods” and “call[s] for policies that encourage and support a gradual transition to sustainable and organic agriculture” (¶160G).
Genetically modified organisms (GMOs) are organisms whose genetic structures have been altered by the introduction of nonrelated genetic material. This cross-species genetic manipulation is meant to enhance or improve the original organism. For instance, in the case of agricultural products, crops can be genetically modified to improve crop yield, improve taste, increase nutrients, resist traditional pests and/or tolerate the application of herbicides.
GMOs represent an ever-growing segment of all U.S. agricultural production. According to GMO Compass (www.gmo-compass.org), a Web site funded by the European Commission, the U.S. is the world’s largest producer of genetically modified crops. In 2008, 92% of all soybeans, 80% of all maize, 86% of all cotton and 50% of all sugar beets grown in the U.S. were genetically modified varieties.
Supporters of genetically modified crops claim they can help eradicate world hunger, make more efficient use of farm land, reduce pollution hazards and raise nutritional levels. Opponents, however, point out that food containing genetically modified crops has not been adequately tested for safety and may cause as-yet-unknown allergic reactions. In addition, they claim that the increasing prevalence of genetically modified crops could result in a handful of companies controlling the world’s seed supply.
Concerns also have been raised over the excessive amount of pesticides that are used on crops. While U.S. farmers have adopted lower-risk use patterns, growers outside the U.S. continue using older, higher-risk pesticides. And imported fruits and vegetables account for about one-third of U.S. consumption of these products.
Accordingly, the General Board has filed resolutions calling for the long-term sustainability of the food supply, including:
- labeling of food products that have been processed using GMO ingredients,
- safety testing of GMO ingredients,
- resource conservation, and
- pollution prevention programs throughout the product life-cycle.
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Labor Standards/Human Rights
Labor Standards
Globalization has made us aware that people around the world work under vastly different circumstances. In some factories, particularly in developing countries, there are reports of forced overtime, low wages, unsafe working conditions and child labor.
Methodism's first social creed, adopted in 1908, was largely concerned with labor issues. Echoing concerns still keenly felt today, the Church called for “a living wage in every industry,” “the abolition of child labor,” “the principle of conciliation and arbitration in industrial dissensions” and, ultimately, “equal rights and complete justice for all men in all stations of life” (¶59, Appendix, The Book of Discipline 1908).
In like fashion, today’s Social Principles assert that “every person has the right to a job at a living wage” (¶163C), “the right...to organize for collective bargaining” (¶163B) and the right “to refuse to work in situations that endanger health and/or life” (¶163C), and that “foreign workers [have] the same economic, educational, and social benefits enjoyed by other citizens” (¶163F).
Accordingly, the General Board is an advocate for workers' rights. Of special concern are the working conditions in the overseas factories that supply American companies with manufactured goods. The General Board believes that companies should maintain and enforce clear codes of conduct for their various suppliers and global facilities. These codes are meant to guarantee that workers all over the world are treated humanely, compensated fairly and allowed to organize without fear of intimidation or reprisal.
By holding corporations accountable for the implementation of codes of conduct, the General Board gives voice to the Church’s commitment to affirm humanity in all places.
Human Rights
Recognizing that “Christians are called to celebrate and protect the worth and dignity of every human being and struggle against oppression and exploitation” (Resolution 4081) and that “persons and groups must feel secure in their life and right to live within a society if order is to be achieved and maintained by law” (¶165D), The United Methodist Church has affirmed “the basic rights of all persons to equal access to housing, education, communication, employment, medical care, legal redress for grievances, and physical protection” (¶162).
As a supporter of human rights, the General Board is especially sensitive to those regions of the globe experiencing political and civil unrest. From apartheid in South Africa, the tomato pickers in Florida, the beverage distributors in Columbia, the cocoa fields of West Africa, the military junta’s treatment of citizens of Burma, the cotton fields of Uzbekistan and the genocide in Sudan, the General Board has taken up the mantle of human rights around the globe.
Advocacy efforts include letter writing, dialogue with corporate management, filing shareholder resolutions and, in rare cases, divestment.
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Diversity/Cultural Sensitivity
Diversity
“We affirm all persons as equally valuable in the sight of God. We therefore work toward societies in which each person’s value is recognized, maintained, and strengthened” (¶162). The United Methodist Church strongly supports diversity and equal rights both in the Church and in society at large. Believing racism to be a sin, the Social Principles recognize such tools as affirmative action to address “the inequalities and discriminatory practices within our Church and society” (¶162A). Specifically, the Social Principles affirm the rights of racial and ethnic persons, women, men, religious minorities, children, the elderly, immigrants, persons with disabilities and homosexuals.
The General Board has called upon companies to embrace equal employment opportunity, use of minority-owned vendors and greater representation by women at all employment levels. Additionally, companies are asked to publicly disclose policies and programs designed to foster diversity and to report on diversity data.
Cultural Sensitivity
In connection with equality of opportunity, The United Methodist Church recognizes that some communities have been victimized in ways that go beyond the economic. Native American communities, in particular, have seen their historic cultures devalued by the appropriation of native names and symbols and the violation of sacred sites. Resolution 3327 denounces “the continued use of Native American names as nicknames for sport teams as racist and dehumanizing,” while Resolution 4081.7 “urges the General Board of Pension and Health Benefits to invest funds in Native American financial institutions and community.”
The General Board continues to advocate for greater cultural sensitivity among corporations, specifically:
- discouraging the use of negative Native American imagery in the marketing of products,
- calling upon corporations to respect Native American lands and sacred spaces when making business location decisions, and
- investing funds in Native American financial institutions through the Positive Social Purpose Investment Program.
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Health
Access to Health Care
The United Methodist Church believes that heath care “is a basic human right” (¶162V). Unfortunately, in 2006, 44.8 million people in the U.S. did not have health insurance, and the percentage of workers covered by an employer-sponsored health care plan decreased to 59.7% from 60.2% in 2005, according to the U.S. Census Bureau.
The General Board supports measures that offer health care that is universal, reasonably priced and supports the individual’s overall health and well-being.
HIV/AIDS
Despite advances in the treatment of HIV/AIDS, this worldwide pandemic continues to devastate communities across the globe. According to United Nations sources, in 2007, 33 million people were living with HIV, including 16.5 million women and 2 million children. Of these, 67% were in sub-Saharan Africa, where only about 10% generally receive any kind of treatment. And new worldwide infections totaled 2.7 million in 2007.
The Church has stated that “countries facing a public health crisis such as HIV/AIDS must have access to generic medicines and to patented medicines” (¶162V) and affirms that “[a]ll individuals living with HIV and AIDS should be treated with dignity and respect” (¶162U).
Accordingly, the General Board has been an advocate—through dialogues and shareholder resolutions—for the availability of low-cost HIV/AIDS medications and for workplace policies that stress education and nondiscrimination based on HIV/AIDS status. We also have asked companies to give serious consideration to the effects the HIV/AIDS pandemic will have on business operations.
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Corporate Governance
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 (Enron, WorldCom, Tyco, Merrill Lynch, Washington Mutual)—have resulted in calls for greater corporate accountability and more transparent governance.
The United Methodist Church has resolved to “persuade corporations to integrate responsible business practices on environmental, social, and governance issues into their operations and to be transparent in documenting these endeavors in public reports” (Resolution 4071.3). It has stated, “Corporations are responsible not only to their stockholders, but also to other stakeholders: their workers, suppliers, vendors, customers, the communities in which they do business, and for the earth, which supports them. We support the public’s right to know what impact corporations have in these various arenas” (¶163I).
Accordingly, the General Board is very interested in how corporations are governed. In particular, the General Board believes: For boards of directors:
- Boards of directors should reflect the diversity of our society (more representation by women and ethnic persons).
- Directors should stand for election each year.
- Directors should be elected only if they receive a majority of the vote.
- The majority of directors, as well as the board chairperson, should be independent of company management (as defined by the New York Stock Exchange).
- Directors should have sufficient knowledge of the industry in which the company operates. For corporate management:
- The chief executive officer and the chairperson of the board should not be the same person.
- Shareholders should have an advisory vote on executive compensation.
- Corporate political contributions should be publicly disclosed.
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Lending Practices
Relaxed Lending Practices
Lending institutions are under constant pressure to increase the value of loan portfolios. As a result, some institutions have elected to loosen their underwriting standards in order to approve large numbers of risky loans to uncreditworthy borrowers.
Relaxing underwriting standards without proper controls can seriously undermine a company’s ability to operate and can even lead to failure. In 2007, when interest rates began to adjust on many mortgages and borrowers defaulted in large numbers, banks’ ability to absorb losses became compromised. This was a major contributor to the ensuing collapse of the housing market.
The United Methodist Church “support[s] existing laws such as the Home Mortgage Disclosure Act, which provides information to the public on where banks and savings and loans make their loans, and the enlarged Community Reinvestment Act, which mandates that banks and savings and loans have the responsibility to serve the credit needs of moderate and lower-income communities” (Resolution 3262.A).
Through the Positive Social Purpose Investment Program, the General Board invests in institutions that provide affordable housing, community development and expanded loan opportunities for poor communities around the world.
Predatory Lending
Predatory lending is a term describing a type of lending that takes advantage of people with poor credit history or little financial education. Usually characterized by unscrupulous or unethical practices, predatory lending can include the application of excessively high fees and interest rates, the use of balloon payments, flipping (successive refinancing of the original loan at increasingly higher rates), packing (linking the issuance of the loan to the purchase of some form of insurance) and steering (directing otherwise creditworthy borrowers into high-interest loans). Most commonly, predatory lending targets the elderly, the poor and minorities. Lenders may be involved in predatory lending either directly or through loan securitization. The securitization of loans is a process whereby one financial institution buys the loans of another, repackages them and then sells them to investors. Securitization provides lenders with new capital, which allows them to make additional loans.
Financial institutions engaged in loan securitization may be implicated in predatory lending if they have not sufficiently evaluated the loans they are securitizing to ensure predatory loans are not present.
The United Methodist Church has directed all general agencies to invest in banks that have “policies and practices that preclude predatory or harmful lending practices” (Resolution 4071). Accordingly, the General Board has encouraged lending institutions to develop policies and evaluative procedures to ensure that loans, either direct or securitized, are not predatory.
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