By Matthew Illian, Director of Responsible Investing
With the 53rd annual Earth Day approaching on April 22, United Church Funds (UCF) marks ten years since the passage of the United Church of Christ General Synod resolution calling on all settings of the church to engage in various strategies to address climate change. That resolution led to the establishment of our Beyond Fossil Fuels Fund (BFF) and Beyond Fossil Fuels Balanced Fund in 2014. The former screens out investments in corporations that produce or explore for fossil fuels; the latter adds to BFF a fixed income allocation emphasizing “green” and “sustainable” bonds.
BFF was launched with $20 million from ten founding investors. By the end of 2022, BFF funds stood at over $106 million representing investments from 115 clients, proving to be among our most popular funds.
They are also among our highest performing funds. Despite the portfolio restrictions, these funds have generated strong returns and have helped dispel the myth that fossil fuel-free investing leads to underperformance.
While we are proud of what these funds have accomplished, divestment from fossil fuels alone is not enough to mitigate climate change. It must be accompanied by a comprehensive approach that considers the complex social and economic issues, as well as the environmental and social impacts of the transition to renewable energy.
For UCF, this means that beyond divestment from fossil fuel drilling and production companies, we utilize the strategy of engagement – particularly shareholder activism, proxy voting and face-to-face meetings with a company’s management and board.
For example, we recently co-filed a shareholder resolution calling on Citigroup to assess its commitment to protecting indigenous rights. In particular, the resolution calls out loans to Enbridge, which develops and manages the controversial Line 3 and Line 5 pipelines that pass through many tribal lands and waterways. Shareholders will vote on this resolution on April 25 at Citigroup’s annual shareholder meeting.
UCF, along with 57 other investors in the World Benchmarking Alliance, also signed a statement calling on oil and gas companies to develop Just Transition plans. Just Transition refers to the fair and equitable shift from fossil fuels to a more sustainable economy by supporting workers and communities that depend on the fossil fuel industry for their livelihoods. A Just Transition plan can help ensure that the transition from fossil fuels is environmentally, socially and economically sustainable.
Now more than ever, investors, companies, policymakers and regulators understand the profound impact that climate change poses to human health and the planet. It has become increasingly clear that “climate risk” is “business risk,” and businesses must integrate sustainability into their business strategies to remain competitive. As a fiduciary of client assets, UCF will continue to use dialogue, letters, proxy voting, shareholder resolutions and our relational networks to ensure that climate risks remain near the top of the corporate agendas.
These are just snapshots of UCF’s work on climate action and environmental protection. We look forward to presenting a full report on our responsible investing efforts, and especially the accomplishments of the BFF funds, at General Synod 34 this summer in Indianapolis. In the meantime, UCF remains committed to our work on behalf of the planet and in creating a better, more just world for all.