Emission Responsibility Through Investment

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19 mins read

Creating Criteria for Corporate Engagement and Environmental Responsibility

Co-author Rev. Kerri Allen
Co-author Rev. Kerri Allen

From the earliest days of the Reformed Tradition, we have understood ourselves to be political. As God is active in all spheres of life, so are we called to be engaged in the social polis. This is one of the most difficult aspects of being Presbyterian. It means taking seriously the call to live out our public theology faithfully within the boundaries of democratic church polity.

As Presbyterians we are expected to enter into difficult conversations and sometimes into making difficult decisions. For the last two years, for the members of the Committee on Mission Responsibility Through Investment (MRTI), the issue at hand has been the relationships between Christians and the fossil fuel industry. A portion of PC(USA) assets are invested in the stocks and bonds of traditional, fossil-fuel based energy companies, making us partly responsible for their enormous footprint on earth, sky, and sea. MRTI strongly believes in the urgency of addressing climate change and the involvement of the PC(USA) and people of faith in reducing the carbon footprint of humanity, and in moving towards utilizing alternative forms of energy.

The Committee on MRTI was asked by the 221st General Assembly (2014) to study categorical divestment from the oil, gas, and coal sector (also called the fossil-fuel industry) and make recommendations to the 222nd General Assembly (2016).

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The most efficient way to discourage burning of fossil fuels is to apply pressure all along the chain of production and consumption, that is, from their extraction to the emission of greenhouse gases.
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As humans who live and experience the joys and pressures of the world, we enter into conversations with our whole and diverse selves, always bringing to the table the contexts from which we are formed. In our committee process, each of us comes into conversation bringing our unique selves, and we listen, not for who shouts the loudest or who tells the most heart-wrenching story, but for what the Holy Spirit is telling us at this particular moment in history.

Co-author Steve Webb
Co-author Steve Webb

Thus the committee engaged in a rigorous discernment process over the past two years, during which we conducted meetings with Presbyterians from diverse perspectives on the fossil-fuel divestment issue and engaged in conversation and advocacy with oil and gas companies.

Using shareholder proxy motions and face-to-face meetings, MRTI has advocated with many companies producing fossil fuel—ExxonMobil, Chevron, Marathon Oil, Marathon Petroleum, Noble Energy, ConocoPhillips, Phillips 66, Ultra Petroleum, Occidental Petroleum, and Hess Corporation—and with some firms that use energy heavily—Union Pacific, Duke Energy, Cinergy (now part of Duke Energy), First Energy, Intel Corporation, Advanced Micro Devices, Dow Chemical, Nucor, Norfolk Southern, CSX (railroad), American Electric Power, Sun Microsystems, Brown-Forman, Timberland, and Con Edison.

This is not a process that we have taken lightly. We understand that our role as committee is guided by the Holy Spirit, who calls us into being and sustains us in relationship with one another. As Presbyterians, we understand that we operate within a church polity that seeks mutual responsibility and accountability. We have sought to be guided in our work by biblical and Reformed theological principles.

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From the start, our deliberations acknowledged the science of climate change and the detrimental impact of fossil fuels on creation.
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From the start, our deliberations acknowledged the science of climate change and the detrimental impact of fossil fuels on creation. We understand that genuine concern for the environment is rooted in the Word of God, spoken into creation. As Reformed Christians, we know God to be the creator and sustainer of all life and have always affirmed God’s sovereignty over the whole of creation.

800px-Tree_Roots_at_RiversideCreation cries out in this time of ecological crisis (Rom. 8:18–22). The sustainability of creation and of human well-being depend on “the flourishing of other life and the integrity of the life-supporting processes that God has ordained” (Restoring Creation for Ecology and Justice, 1990, p. 2). When creation is violated, so too are human communities, particularly those most vulnerable in the U.S. and around the world. As the church, we are called to respond to Jesus’ prodding with our witness and action.

The question, then, becomes: How do we faithfully carry forth such a witness? In our time together as a committee we have learned that there is no easy path forward when it comes to Christian responsibility, creation care, and the fossil fuel industry. This issue in particular is complicated by the way in which fossil fuels play a significant role in our everyday lives.

After considering input from many sources, the committee on MRTI produced a report that passed unanimously at the Presbyterian Mission Agency Board’s February meeting and will be considered by the Immigration and Environmental Issues Committee at the 222nd General Assembly later this month.

The MRTI report includes the biblical, moral, and scientific imperatives for the church to work toward mitigating climate change. The MRTI report reaffirms the call of the 2008 policy The Power to Change, approved by the 218th General Assembly, for Presbyterians to advocate for a move to renewable sources of energy production; however, the 2008 policy does not preclude owning fossil fuels in investment portfolios. [1] To address this, the MRTI report’s recommendations asks the 222nd General Assembly (2016) to affirm a set of criteria of evaluating all companies – including those in the oil, gas, and coal industries – to address both the demand and supply side of energy production through fossil fuels.

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We believe that a targeted engagement strategy based on these criteria would be more effective in mitigating climate change than categorical divestment from the fossil fuel industry.
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These recommended criteria would be significantly helpful to MRTI’s process of corporate engagement with the fossil fuel industry. They include the potential to recommend divestment from a particular company that is not in compliance with the church’s policy. We believe that this targeted engagement strategy would be more effective in mitigating climate change than categorical divestment from the fossil fuel industry.

gas-pump_100166460_lThe most efficient way to discourage burning of fossil fuels is to apply pressure all along the chain of production and consumption, that is, from their extraction to the emission of greenhouse gases. This forces the economy to adjust farthest and fastest at the places with the highest social cost (carbon emissions) and the lowest social and economic cost of adjustment.

Applying pressure at only one point along this chain of fossil fuel production and consumption — say through divestment from fossil-fuel extracting companies — would be less efficient and ultimately slower.

Just as defoliating acres of coca and marijuana has not solved the drug problem, divesting from firms that extract fossil fuel is not likely by itself to bring about the necessary reduction in our economy’s production of greenhouse gasses. The main source of the problem is on the demand side. This is especially true in the current situation of excess supply and low prices of fossil fuel. For instance, the rating agency Fitch estimates that “…China’s coal industry could have 3.3 billion tonnes of excess capacity within two years.” [2] Thus, even if all US coal companies ceased to operate (several major ones are now entering bankruptcy), coal from the international market will be readily available and cheaper in the coming years.

A comprehensive carbon tax would put pressure efficiently all along the chain of fossil fuel to greenhouse gas, but, this seems politically unlikely in the US right now.

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A holistic economic response to climate change also involves government regulation, which many companies spend lavishly to lobby against.
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Investor advocacy by groups like MRTI, in coordination with others, can encourage efficient reduction of carbon burning. This strategy involves dialogue with companies all along the chain—extracting fossil fuels (coal, oil, gas), consuming fossil fuels (airlines, bus and trucking companies, electric utilities, etc.), and producing equipment that burns fossil fuels (manufacturers of automobiles, busses, trucks, tractors, heating and cooling equipment, airplanes, ships)—to get them to move to more energy-efficient and non-fossil-fuel technologies. Firms that refuse to respond to the dialogue could face selective divestment. In a few cases, divestment from a whole sector might be the result (e.g., coal mining). No large balanced portfolio could divest from all these sectors, however, as they are such a huge share of our economy. The transition to a carbon-neutral economy must entail most of these firms, along with new entrants, changing their product lines and production processes.

windmills - PDThe investor advocacy of PC(USA) and others in the faith community will not suffice on its own to achieve change on such a scale. Mobilizing support from all classes of investors, who mostly focus on returns, will require informing them better about how the companies’ profitability depends on the response to climate change.

MRTI therefore presses firms to report annually on the company’s view of and response to its climate-change risks and opportunities, including the comprehensive outlook on energy reflected in the company’s strategy. We ask how the company’s strategy can adjust for significant changes (up or down) in demand for oil, gas, and coal, taking into account the carbon intensity of their reserves, and their location (ultra-deep waters, oil sands, etc.). A wide range of investors support asking firms to report on carbon pricing scenarios and risk assessment of long-term projects and products, and on their goals for reducing greenhouse gas emissions and increasing use of renewable energy sources. As more information is made available to the public, management on its own often sees the need for reforms, and investors gain the leverage to demand further improvements.

A holistic economic response to climate change also involves government regulation, which many companies spend lavishly to lobby against. Too often still, a company may say that it wants to reduce its carbon footprint while at the same time spending resources to prevent regulations to achieve that. MRTI advocates for oversight and transparency about companies’ lobbying activity and political spending, including by trade associations to which the companies belong.

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As Presbyterians and Reformed Christians, we try to account in our ethics for the complex nature of life. Our understandings of the doctrine of original sin and human hubris that aggrandizes god-like power disabuse us of the idea that we can ever achieve absolute moral purity.
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Positive investments also help the move to carbon neutrality. The Presbyterian Foundation has allocated at least 1 percent of the Presbyterian Endowment Fund for investments that target climate change solutions: clean energy equities funds or indexes, green bonds and real estate investments, renewable energy funds, clean tech venture capital, and sustainable forestry and agriculture.

earth handsAs Presbyterians and Reformed Christians, we try to account in our ethics for the complex nature of life. Our understandings of the doctrine of original sin and human hubris that aggrandizes god-like power disabuse us of the idea that we can ever achieve absolute moral purity. Life does not come to us in simplistic black/white, either/or realities. Even as it pricks our conscience, we travel to the General Assembly in airplanes, trains, and automobiles.

We in MRTI are conscious of our own environmental footprints. We are teaching and ruling elders, doing our best to serve God and the church faithfully, and as pastors, chaplains, professors, doctors, lawyers, teachers, organizers, and others, we consume fossil fuels on a daily basis. If we are privileged enough to have retirement savings, it is likely that at least some part of it is invested in the fossil fuel industry.

Thus, MRTI presents this report to the 222nd General Assembly hopefully, prayerfully, and with the conviction that we have diligently engaged the task set before us. We pray, as we come to the Assembly, that we will all be courageous enough to follow God’s call into the political sphere and humble enough to listen for the Spirit’s guidance in this particular, critical moment in history.

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[1] The 2008 energy policy goes farther than the brief 2006 statement in favor of “carbon neutrality,” but neither directly address the consequences of climate change and the choices they pose in the form of refugees, corporate/community transition, species loss, need for public planning, food/water availability for existing and projected populations, etc.
[2] Economist, 9 April 2016, p. 66.

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AUTHOR BIOS: Rev. Kerri N. Allen is a Reformed theologian, PhD student, and hospital chaplain in Chicago. Prior to responding to a call in ministry, Kerri had a first career in politics, serving as a political appointee at multiple levels of government, including serving as a legislative assistant in the United States Senate with an expertise in healthcare policy. Now, as a student in theology and ethics at Garrett-Evangelical Theological Seminary, Kerri uses her diverse experiences to focus on disparities in quality of healthcare for black women in the United States. Originally from St. Paul, MN when Kerri is not buried in a book or writing a paper, she enjoys hiking, travel, watching sports, cooking, or spending time with one of her many nieces or nephews.

Dr. Steve Webb is a ruling elder at United Christian Parish, Reston VA, which is a multi-denominational church uniting PC(USA), United Methodist, United Church of Christ, and Christian Church (Disciples of Christ). Steve is an economist, with degrees from Yale (BA) and Chicago (PhD). He worked for many years on international development issues at the World Bank, retired from there, and still does consulting with them and other development organizations.

Read original article by Ben Perry: “Divesting From the Sins of Our Past.”

Read “A Response to Divesting from the Sins of Our Past” by Faithful Alternatives.

Read “Fossil Fuel Divestment: Strengthening Our Response to an Urgent Crisis” by Rev. Abby Mohaupt and Colleen Earp of Fossil Free PC(USA).

Read Item 9-09: “Mission Responsibility Through Investment Report on Divestment from Fossil Fuel Companies”.

Read more articles in this issue “A Year for Confessions: Issues of Social Justice Coming before the 222nd General Assembly.”

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