The LOPC Foundation has announced a major change in its investment policy that will allow it to substantially increase its investments in so-called ESG mutual funds. ESG investing is financial shorthand for mutual funds that operate according to Environmental, Social and corporate Governance guidelines.
Such funds, among other things, avoid stocks of tobacco and alcohol companies, gun and munition manufacturers, various natural resources mining firms, and the gambling industry. Environmental criteria include a company’s treatment of hazardous waste and air pollutants, or treatment of animals. Social criteria cover employees’ health and safety, relationships with communities and customers, while corporate governance factors deal with executive pay and shareholders rights. In the past few years, much more data in all of these areas is available than previously, against which to measure companies’ behavior.
To be sure, the Foundation, and the Presbyterian Church (USA) have, generally speaking, historically maintained investments in various socially-responsible mutual funds. But the LOPC Foundation’s holdings in this category previously were modest. Partly this was a result of a limited universe of such investments, which meant investment returns and profit potential were not as robust as investments elsewhere.
Today, that is no longer the case. Within the past few years, the marketplace of ESG funds has not only exploded but also changed considerably. With careful choices among different funds, investment returns now are comparable to non-ESG funds.
Starting late last year, following adoption of the new investment policy, the Foundation began shifting a significant portion of assets away from traditional mutual funds into ESG funds. As a first step, it has raised its ESG investments to roughly 35 percent of its investment portfolio. “Foundation trustees studied and discussed this policy change at length,” says Staci Johnston, Foundation president. “With the help of our investment advisors, we will be closely monitoring the results.
“We think this move makes the Foundation more sensitive and responsive to the many environmental, social, and governance issues that are increasingly important in our economy and the world today. And we will continue to be guided by the vision statement of the Foundation: striving to be a permanent, reliable source of significant funding for LOPC’s ministries.”