Can the General Assembly direct the Board of Pensions to divest?


A General Assembly committee voted 35-20 on June 18 to recommend approval of a proposal asking the 2018 General Assembly to direct the Board of Pensions and the Presbyterian Foundation to divest from the fossil fuel industry, and to seek out and invest in securities of companies focused on renewable energy or energy efficiency.

On the surface, that seems to be a major win for the Fossil Free PCUSA movement, which has been organizing intensely in recent months to sway public opinion and  General Assembly votes in favor of divestment – with 40 presbyteries lining up to support the main overture calling for divestment.

But a contentious issue rose before the Environmental Issues Committee in its discussions: whether the Board of Pensions of the Presbyterian Church (U.S.A.) is compelled to follow when an assembly votes in favor of divestment. There’s disagreement about that – with Frank Spencer, president of the Board of Pensions, telling the committee that “the board is deeply concerned about climate change,” but also that the board’s decisions regarding investment matters are “solely within the board’s purview” and not subject to review or approval by the General Assembly.

Following that discussion on June 18, the committee voted to approve fossil fuel divestment – but also took a series of actions that potentially make the way less clear. It voted to:

  • In favor of an overture, which calls for a complete divestment of the denomination’s interests in the fossil fuel industry.
  • Recommend approval of two overtures from the Presbytery of New Covenant Presbytery in Texas that oppose divestment and call on the denomination’s Mission Responsibility Through Investment committee (MRTI) to continue corporate engagement with oil, gas and coal firms and to report back to the 2020 General Assembly
  • Recommend disapproval of the report from MRTI, which did not call for fossil fuel divestment but asked the assembly to direct MRTI to continue to pursue its corporate engagement process and to approve a set of metrics that MRTI is using to measure progress during the 2019 and 2020 shareholder proxy seasons, with “possible selective divestment recommendations” to the assembly in 2020 for companies who aren’t moving towards compliance. MRTI had argued that the metrics were key – providing the PC(USA) way to measure and assess whether its corporate engagement was bearing fruit.
  • Approved an overture asking the assembly to “call upon the whole church to raise a prophetic voice regarding the urgency of healing the climate of the earth, our home and God’s gift for the future of all life, human and nonhuman.”

The committee’s discussions revealed the complexity and the passion involved as the PC(USA) considers how to faithfully respond to climate change and global warming – and the reality that what may seem to be a decisive vote can be harder in practice to live out.

However, on the morning of June 19, committee moderator Michael Kirby, from the Presbytery of Chicago, called Kathy Lueckert, an assembly tracker, before the floor of the committee. She requested that the committee revisit their actions from June 18 on the overtures related to fossil fuel as the committee was “sending conflicting messages before the General Assembly.”

So, the committee suspended Robert’s Rules for a time and engaged in a discussion of how to rectify the conflicting messages sent before the assembly. A common sentiment among commissioners: “I’m looking for a win-win situation.” This phrase, first spoken by commissioner Sam McGregor, has been echoed repeatedly during the committee’s discernment.

Rob Fohr, a representative of MRTI, visited the committee on June 19 to answer questions. Commissioners seemed to be seeking a middle ground: they want to call for divestment, as reflected in their vote the previous night, but, given the fact that this call for divestment might not result in the Board of Pensions forfeiting their assets in fossil-fuel companies in a timely matter, they want MRTI to continue engagement with these corporations until complete divestment occurs. Kirby from the Presbytery of Chicago, suggested that the language be changed to target polluters, not fossil fuel producers.

Stephen Hart

Stephen Hart, commissioner from the Presbytery of Southern New England, moved to revisit the overture asking MRTI to continue its policy of corporate engagement and use its leverage as shareholder to pursue policies congruent to the PC(USA)’s mission (08-10) – and to essentially quash the previous evening’s vote of approval by responding to the recommendation on that overture with the action taken on the overture recommending complete divestment (08-01).  The committee revisited their decisions voted in 48-5 in favor of Hart’s recommendation.

The committee then reconsidered MRTI’s report and ultimately voted to answer it with their action taken on the overture recommending complete divestment (by a vote of 36-11, with 5 abstaining).

So, what does all of this mean for the issue of divestment?

The overture recommending complete divestment (08-01) will go before the full assembly with the committee’s recommendation for approval. If the assembly approves the overture – thereby directing MRTI and the financial institutions of the PC(USA) to divest from any assets held in the fossil fuel industry – they will likely also follow the committee’s recommendation to respond to MRTI’s report and the overtures advocating for shareholder engagement with the actions of the divestment overture, effectively making divestment the PC(USA)’s sole policy on financial engagement with fossil fuel companies.

The assembly, however, may not follow the committee’s recommendation. Given the conflicting opinions on divestment, George James, a commissioner from New Covenant Presbytery, expressed a desire to begin drafting a minority report on the decision.

However, some questions remain as to how that policy will be interpreted.

Should the PC(USA) be barred from investing in fossil fuels? Some background.

On June 18, committee leadership invited representatives of the financial bodies of the PC(USA) – MRTI, the Presbyterian Foundation, and the Board of Pensions – to speak before the committee.

Michael Kirby

MRTI works to ensure that the portfolios of the Foundation and Board of Pensions are aligned with the larger goals of the denomination. In so doing, it produces a list of “prohibited securities,” which encompasses corporations that the fiduciary branches are barred from investing. Traditionally, this has included companies involved in industries related to alcohol, tobacco, and weapons, or that pose significant human rights concerns. (For example, in 2014 the General Assembly votedthat MRTI add Motorola, Caterpillar and Hewlett-Packard to the list of prohibited securities related to concerns over human-rights violations in Israel/Palestine.)

Concerns over the harmful effects of climate change – particularly about how fossil fuel-related industries are complicit in producing these harmful effects, and in turn how climate change disproportionately harms poor and minority populations – were brought before the 221st General Assembly in 2014. That assembly passed a resolution to divest in fossil fuel companies that produce the highest levels of carbon emissions, referring the plan for divestment to MRTI. Upon this referral from the assembly, MRTI undertook a process of developing a set of criteria for evaluating the harm of fossil fuel-related companies in order to target specific corporations that were candidates for divestment.

After reviewing similar policies that MRTI already used to determine whether individual corporations would be recommended for placement on the prohibited securities list, they returned to the 222ndGeneral Assembly in 2016 to request a clarification of the original resolution and guidance on how to move forward. The issue of divestment came before the assembly again in 2016, and the assembly resolved that MRTI should develop a rigorous metric system for evaluating fossil fuel industries, use their leverage as shareholders to vie for less harmful practices from within these fossil fuel industries, and report back to the 223rdGeneral Assembly (2018) with recommendations for selective divestment.

MRTI’s report to this assembly details the system of metrics that it has developed for evaluating the ethicality of a fossil fuel company, attempts to demonstrate that MRTI is still in the process of engaging corporate interests, and recommends that the committee: “Direct MRTI to pursue its engagement process with deliberate haste and utilize its Guideline Metrics with corporations in the 2019 and 2020 proxy seasons and report back to the 224th General Assembly (2020) with possible selective divestment recommendations for the companies who are not moving towards compliance with the General Assembly’s criteria established by the 222nd General Assembly (2016).”

Katie Carter, a representative from MRTI, told the committee on June 18 that if certain companies make “no change over the next couple of years, MRTI would make recommendations for divestment.”

How would a decision to divest be implemented? Would it be implemented?

According to Anita Clemmons, vice president and managing director of investments for the Foundation, said the Foundation has “a total endowment of $720,000,000 … invested in harmony with Presbyterian values,” said Clemmons. When it is required to divest from certain companies, she said: “The investment committee studies the impact to the portfolio, considering the fiduciary duty of the Foundation … . With board approval the investment managers are directed by the Foundation to divest of those said securities over time to not cause harm to the portfolio beneficiaries. Historically, the divestment has been completed within six months of the General Assembly recommendation.”

Board of Pensions president Frank Spencer and senior vice president, treasurer and chief of investment Judith Freyer took a more aggressive stance in opposition to divestment than Clemmons. In prefacing the Board of Pension’s process for divestment, Spencer said: “The Board is deeply concerned about climate change, particularly as it works its harm on some of the world’s most vulnerable populations. No one who speaks to you today will have any disagreement about the urgent need for aggressive action to reduce carbon emissions.”

Spencer added: “MRTI now stands in a leadership position in the international coalition of Climate Action 100. That coalition is made up of investors representing one third of the world’s investable assets, and is targeting the 100 top carbon emitters, not the energy sector solely. The stated goal is to meet the Paris Accords. What you are considering are the tactics to bring about change, not the need for change itself. On that we all agree.”

Turning to the issue of divestment, Spencer took a more hardline approach, saying: “First, the funds that the Board holds are not the Church’s funds. They are held in trust for the members of the plan, many of whom are Presbyterians, but thousands of whom are not. … Each year, MRTI meets with the Board’s investment committee to propose certain prohibited securities. The investment committee then determines which if any of those recommendations it can accept without sacrificing the return needed to meet the obligation to its members. So far, the Board has accepted all of MRTI’s recommendations.”

Qualifying that the Board of Pensions takes seriously the referrals of the General Assembly, Spencer went on to say that, “the decisions of the board in investment matters is solely within the board’s purview and is not subject to GA review or approval.”

Adding that the Board of Pensions has made the “largest investment in positive energy in a fossil free fuel fund in the history of our denomination,” Spencer then said that a similar investment plan offered through individual Retirement Savings Plans (RSP)has met a lukewarm response, with fewer than 200 of the Board of Pension’s 12,000 Retirement Savings Plan enrollees opting for the plan.

Stephen Hart, a commissioner from Southern New England, asked if “the Board of Pensions is notunder the jurisdiction of the GA? … And in 08-01 … we’re calling them to command them to change … their investments. So I’d like that clarified.” Kirby restated the question for Freyer, asking: “Does the General Assembly have the authority to address the investments of the Board of Pensions?” Freyer responded: “The General Assembly can urge us to take action, they can’t direct us to.”

Freyer added: “When Caterpillar, Motorola and Hewlett-Packard went on” the do-not-divest list, “our managers were told that if they did not own those companies’ stock portfolios, they could not buy them. We had two managers who owned Caterpillar and Hewlett-Packard. They were told that they could retain them until they sold them in other portfolios with similar investment strategies. A manager can ask for an exception if not owning a particular security would cause our portfolio to underperform similar portfolios with similar mandates.” She said they had “never granted an exception for tobacco, or alcohol or gaming,” but added that the Board of Pensions currently has assets in a company that is on the prohibited securities list. “Right now we do have Boeing in our portfolio. Boeing is on the military divestment list, but it is also a major manufacturer of commercial aircraft.”