Wespath intensifies its scrutiny of bonds

Key points:

• Wespath, The United Methodist Church’s retirement-benefits agency, is now excluding investments in the bonds of multiple nations.
• The move comes in response to a resolution approved at last year’s General Conference that dealt with only three countries.
• The Wespath board opted to expand the scope to look at nations’ human rights records in a more holistic way.
• The changes affect less than 1% of Wespath’s investments on behalf of United Methodist employees’ retirement plans.

Because of human rights concerns, The United Methodist Church’s pension and benefits agency is now avoiding investments in the bonds of some 60 countries.

The move responds to a resolution approved by last year’s General Conference that calls on United Methodist institutions, including Wespath, not to invest in the governmental debt of Israel, Morocco and Turkey because of those nations’ long-term military occupations. Delegates passed that resolution — along with others — by a vote of 686-36 on the legislative assembly’s consent calendar.

After prayerful consideration, the Wespath board decided to expand on the resolution. The result, which the agency announced Aug. 6, is a new enhanced human rights framework for assessing potential investments in the sovereign debt of all countries.

“With our framework, we took a step back,” Andy Hendren, Wespath’s top executive, told United Methodist News. “We wanted to do a more principled, holistic look at all sovereign debt, so it not only looks at military occupations like those identified in the resolution — those three. But there are other military occupations in the world that government should be held accountable for.”

Wespath also is scrutinizing a national government’s track record with authoritarianism, corruption and international sanctions, Hendren said. 

Using these criteria, the retirement-benefits agency’s screening process has identified more than 60 countries with elevated human rights risks. Wespath currently holds sovereign debt in about a quarter of these countries, including not only Israel, Morocco and Turkey but also China, Qatar and Russia, among others.

Altogether, these holdings represent about $90 million — or about 0.4% — of Wespath’s total benefit-plan investments. Put another way, the new exclusions affect less than one-half of 1% of plan participants’ assets.

Now, the agency is in the process of replacing these holdings with investments that offer similar returns but without the human rights fears.

Hendren said Wespath flagged Russia for its annexation of Crimea as well as its military occupation of parts of Georgia, Moldova and Ukraine during its ongoing war with Ukraine. Russia is also facing international sanctions. The decision to exclude the sovereign debt of China and Qatar was driven by their records of authoritarianism.

Wespath, in operation since 1908, maintains one of the world’s largest faith-based pension plans. As of the end of last year, the agency was managing nearly $26 billion in assets for United Methodist employees and institutional investors.

For now, the new human rights framework only applies to sovereign-debt holdings in Wespath’s “P-Series,” its investments on behalf of United Methodist employee participants. Wespath’s “I-Series” of funds for institutional investors does not use the same framework.

“It falls on United Methodist investors to prayerfully consider how they live into this,” Hendren said. “We have a set of funds within the I-Series, the Social Values Choice Funds, that already exclude the countries named in the resolution because of human rights and climate screenings, so they have an ability to live into the resolution themselves if they want to.”

To develop the new human rights framework, Wespath collaborated with the Heartland Initiative, a longtime strategic partner that advises investors on how to advance human rights.

“Heartland’s analysis focused on governments characterized by authoritarianism, public corruption, comprehensive sanctions and military occupation,” said Rich Stazinski, the nonprofit’s executive director and co-founder.

“To identify these criteria, Heartland used rigorous and consistent data from internationally recognized sources with credible institutions and robust internal processes.”

He added that the four criteria not only put a spotlight on a nation’s treatment of people but may also reveal financial risks for investors. 

Concern for human rights has long been part of Wespath’s investment strategy. Paragraph 717 in the Book of Discipline, the denomination’s policy book, requires all United Methodist institutions, including Wespath, to “make a conscious effort” to invest in ways that are socially responsible and avoid investments that don’t align with the denomination’s Social Principles.

“We really try to live into that,” Hendren said.

At the same time, Hendren said, the Discipline is also clear that Wespath’s main priority is to serve as a fiduciary — that is, to act in the best interests of its beneficiaries and investors.

Often, the goals of human rights and responsible stewardship go hand in hand.

That was the case when the retirement-benefits agency’s board voted in 2014 to exclude certain investments in coal and avoid investing in certain companies that operate in countries with “a prolonged and systematic pattern of human rights violations.” The policy reflected concerns that those investments presented an “excessive sustainability risk” that would ultimately be bad for Wespath plan participants’ bottom line.

Hendren said the new policy regarding sovereign debt is more values driven.

“This framework includes a guardrail to make sure nothing we do in this framework violates our fiduciary duty,” he said, “since, if there was a country identified through our analysis in which we had a need for significant holdings because of the risk and return needs of the funds, we wouldn’t exclude that country.”

Retired Bishop Robert Schnase, who is now in his ninth year as Wespath’s board chair, said as he sees it, the new framework has not compromised anything as far as the agency’s fiduciary responsibility.

General Conference’s action, he said, led to deep conversation among board members and staff that ultimately resulted in widening the scope of the approved resolution.

“I’m just proud of Wespath in this moment,” Schnase said. “We have a diverse board of directors that have different political views, that have different experiences with business and finance and with church.”

He was impressed that the group, with all its diversity, decided to actively engage in what is often a fraught discussion.

Instead of “cowering away,” he said, board members decided, “We can do better than this. We can do better, even than what General Conference has asked us.”

Bishop Rosemarie Wenner, the Council of Bishops’ co-ecumenical officer alongside Bishop Hope Morgan Ward, referenced the Social Principles’ call to “serve God and neighbor in all we do.”

“To put our belief into practice, we (individually and collectively) have to discern how to invest or divest our assets so that we minimize harm being done to fellow humans and God’s creation and maximize doing good through socially and ecologically responsible investment,” Wenner said.

She noted the church’s ecumenical work with partners like the World Council of Churches to further explore an “Economy of Life” that puts people and planet over profit.

“I am pleased that Wespath continuously does this discernment and took the decision to adapt a new human rights exclusion framework,” she said. “This is a step in the right direction — a step in an ongoing journey, which is a vital part of our discipleship.” 

Bishop Ward agreed and gave thanks to the agency’s leadership.

“Wespath has led in faithful and bold ways to move the General Conference decision forward into concrete action,” she said. “As injustice and oppression continues in our world, the prophetic witness of the church is essential.”   

Hahn is assistant news editor for UM News. Contact her at (615) 742-5470 of [email protected]. To read more United Methodist news, subscribe to the free UM News Digest.