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Conversation at the PC(USA), A Corporation: Finding diversity and equity in investing decisions

The board of the Presbyterian Church (U.S.A.), A Corporation, is continuing to explore ways to make diversity, equity and inclusion part of the lens it uses in making investment decisions generally, and also in finding investment opportunities in the Louisville community, where the denomination’s national offices are located.

Photo by Towfiqu barbhuiya on Unsplash

Meeting via Zoom April 21-22, the PC(USA), A Corporation board continued a discussion of these issues begun earlier this year, when Kathy Lueckert, president of the A Corporation, cited a conversation she had with a colleague who asked, “Why isn’t the A Corporation investing in Black and Brown institutions?”

Kathy Lueckert

The board heard presentations on two possible approaches it could consider: the Northern Engage 360 Fund from Northern Trust, and the New Covenant Trust Company’s strategy of tracking the Russell 3000 U.S. stock index while targeting investment in firms that have a “proven commitment to equal opportunity, nondiscrimination and diversity,” according to a supporting document presented to the board.

Jessica Hart, a portfolio manager for Northern Trust – which is the investment management firm the Presbyterian Foundation uses – described how the Northern Engage 360 Fund was designed. Previously, the diversity segment of the market had focused on firms owned by women or people of color – a relatively small segment of the market, she said. That, along with the recognition that the diversity of the investment management business “hasn’t really changed” significantly over time, limited the possibilities for engagement using that historic approach, Hart said.

So she and other colleagues began looking at the issue differently – creating a diversity impact assessment instrument that could be applied to a range of companies, regardless of size or ownership. That allowed Northern Trust to ask important diversity questions of more firms, including bigger ones, as a way of showing this is a “critical component” in evaluating performance, Hart said.

The assessment tool the Northern Engage 360 Fund uses asks questions in four areas:

  • About the demographics of the ownership structure;
  • About the employees who work there – including the investment team and executive leadership;
  • About community engagement;
  • About corporate spending.

That tool allows the fund to collect a “mosaic of information” that can be quantitatively scored, Hart said. “I don’t want the marketing mumbo-jumbo,” but the demonstrated track record. After scoring the assessments, managers from firms that scored in the top third of the diversity impact assessment were eligible for consideration for the multi-manager investment team.

The A Corporation board asked questions about how investment in that mutual fund would correlate with the investment parameters imposed by the PC(USA) General Assembly, which has a criteria of screening to avoid investments in companies involved with tobacco, alcohol and gambling, for example, and which has directed the Committee on Mission Responsibility Through Investment to address climate change through corporate engagement with oil and gas firms.

Bridget-Anne Hampden (Photo by Leslie Scanlon)

A review found that about 4.5% of the Northern Engage 360 Fund was in investments on the PC(USA)’s restricted list, Hart said.

For the board, one questions is “what is our appetite for supporting” diversity, investment and inclusion work, when it potentially might have an impact on earnings, said board member Bridget-Anne Hampden. To what extent is the board willing to “put our money where our mouth is?”

Board member Cynthia Campbell said another question is “how much is that 360 Fund outside of our parameters, and where? What kind of flexibility is there in that fund?”

Cynthia Campbell (screen shot by Leslie Scanlon)

Lueckert said the board is still gathering information, and will continue the discussion when it meets in August.

She also hopes to have more information then about investment opportunities in Louisville. The board had discussed the idea of trying to transfer assets to a local bank that is Black or Brown-owned, so Campbell arranged a conversation with Nikki Lanier, a local diversity, equity and inclusion consultant.

“Sadly, there are no black or brown financial institutions in the Louisville area,” a report to the board states. But Lanier, a lawyer and chief executive officer of Harper Slade, had suggestions of other ways of possibly investing in the Louisville area. So Lueckert said Harper Slade will organize a series of “meet and greet” round tables over the summer with local leaders interested in economic and workforce development, particularly in predominantly-Black West Louisville.

Other Presbyterian groups are interested in those conversations as well and want to participate, Lueckert said. “There’s a flurry of investment work beginning to go on in West Louisville we would then be positioned to be a part of,” she said. “So stay tuned.”

The board also worked through a series of business item as it nears the home stretch before the 2022 General Assembly, which convenes in plenary June 18.

The board voted to accept a report giving a clean audit from an independent auditing firm, MCM CPAs & Advisors, for 2020 and 2021.

It elected Hampden to serve as its co-chair for a two-year term, beginning July 15.

It considered the report the A Corporation will submit to the General Assembly – built around the idea that “administration is ministry” too, explaining that the A Corporation provides support and services – from information technology to accounting to human resources – so that PC(USA) ministries can flourish. As part of that work, the A Corporation manages average net assets of more than $700 million.

Lueckert also said that cash flow in PC(USA) is in a much better position now than in the early days of the COVID-19 pandemic, when the A Corporation relied on an $8.8 million Paycheck Protection Program loan, since forgiven, to cover cash flow needs. The improvement is “due to the faithfulness of Presbyterians, and I give thanks to God for that,” Lueckert said.

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