Wespath’s Perspective on Fossil Fuel Exclusion Ahead of General Conference

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Special to United Methodist Insight

At General Conference, delegates will be asked to wrestle with complex questions. One such question is whether fossil fuels should be added to the list of investment exclusions in The Book of Discipline—alongside alcohol, tobacco, weapons, gambling, pornography and private prisons.

Wespath understands and shares the concerns of those advocating for divestment from fossil fuels. The risks of climate change are real and urgent, and we know moving away from society’s heavy dependence on fossil fuels is a pivotal step to a healthier planet. Addressing climate change aligns with United Methodist values and supports the financial interests of those we serve.

However, Wespath proposes an alternative, inclusive option to full divestment. We believe the complexity of climate change requires an approach that uses all the tools available to investors. And we believe this approach will deliver the most change and real-world impact.

Reducing Emissions through Engagement with Fossil Fuel Companies

The sobering reality is that today fossil fuels remain central to the world economy, supplying 80% of global energy demand and meeting societal needs well beyond the gas we put in our car. From how we build our homes, generate electricity, grow food to feed 8 billion people, and produce life-saving medical supplies, fossil fuels are deeply interwoven into our everyday lives.

Through direct engagement with companies that produce fossil fuels, Wespath uses its voice as an investor to enact change. For example, we engaged with Chevron and Occidental Petroleum to secure commitments to achieve net-zero emissions.  

In addition, we recently engaged to improve Chevron’s methane management practices. The U.S. Environmental Protection Agency (EPA) estimates methane is 28 times more potent than carbon dioxide as a greenhouse gas. Chevron has since joined a leading industry association focused primarily on methane management. We also are pushing Chevron to align its lobbying with its climate commitments and have publicly voted against board directors when we didn’t see strong enough progress. We could not engage these ways if we were not a shareholder.

Some divestment advocates feel we are lending legitimacy to fossil fuel companies through continued investment and thus misaligning with the Methodist principle of “doing no harm.” Conversely, Wespath believes we pay witness to caring for creation by holding companies accountable, i.e., doing good.

We do all of this with a very small investment stake in fossil fuel companies. For example, Wespath owns just 0.009% of Chevron’s shares. Forcing us to sell our Chevron holdings would have no impact on the company’s bottom line nor reduce emissions in the real economy. What’s worse, these shares would likely be purchased by another investor who cares much less about climate than Wespath.

Impacting the Economic System

We practice engagement throughout all of our investments. In addition to talking to fossil fuel suppliers, we also engage with heavy fossil fuel consumers, as highlighted in our recent video detailing our engagement with engine manufacturer Cummins.

Our engagement efforts extend to asset managers and government agencies. For instance, we have urged the U.S. EPA to adopt strong standards for regulating methane emissions across the fossil fuel sector.

There Is a Place for Divestment

Many divestment proponents note that organizations representing over $40 trillion in assets have divested from fossil fuels to highlight the momentum behind divestment. Wespath’s $26 billion in assets are actually included in this figure.

That’s because Wespath already practices targeted exclusion of fossil fuel companies where we believe there is excessive financial and climate risk, such as those in the thermal coal sector. Wespath regularly assesses the companies in which we invest to ensure they are taking adequate steps to address climate risk.

In recent years we have broadened the scope of our risk-based exclusion policy—and we regularly assess our policy for improvements. Wespath also created three fossil-fuel free funds, the Social Values Choice funds, to provide options for individuals and organizations that aspire to align their investments more closely with their own values. We just recently announced we are expanding access to these funds for both institutional investors and more individuals saving for retirement.

As was covered in United Methodist Insight, this inclusive approach will provide options to individuals and organizations we serve to exclude fossil fuels from their investments. At the same time, it allows Wespath to continue with our ambitious corporate engagement, which many we serve prefer.

Complex Issues Require Multiple Approaches

We recognize that transitioning from 80% of energy needs met by fossil fuels to nearly 0% in 25 years, as the science says is necessary, is an immense challenge defying easy answers. That’s why we strongly believe pursuing multiple paths to climate action—including both engagement and selective divestment—is the best way to reflect a care for creation and to follow our mission of caring for those who serve.

And though our convictions may differ, we know that grace and humility are crucial as we move forward. We ask that our preferred strategy not be confused with apathy. We remain firmly committed to improving the effectiveness of our engagements, how and when we selectively divest, and our positive climate investment strategies.

Andrew Q. Hendren is General Secretary and Chief Executive OfficerWespath Benefits and Investments in Glenview, IL.