How would selective divestment affect the General Board's fiduciary responsibilities to investors? 

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Investment managers have two responsibilities to their shareholders. One is to make their money grow so that financial goals…like adequate retirement and health care… can be met. The other goal is, if requested, to choose investments consistent with the values and moral standards of the investors. It is increasingly common for investors to request screens or filters for their investments, enabling a portfolio to avoid tobacco or firearms companies, or companies that pollute the environment. During the 1980’s, investment managers avoided investment in companies that supported South African apartheid. Currently many institutions are avoiding investment in companies supporting the Sudanese government. In each case, alternatives are found that may even outperform the stocks divested.

Olive Trees Uprooted

United Methodists have already adopted guidelines for socially responsible investing, which can be found at They proscribe investment in companies involved with tobacco, alcohol and gambling. Certain formulae are used to avoid investment in companies whose primary product is anti-personnel weapons. A number of the companies supporting Israel’s occupation of Palestinian land are already ineligible for United Methodist investment because they meet the criteria set forth in the SRI guidelines for companies to avoid.

A great deal of research and analysis has been done into the question of whether it’s possible for managers to meet both goals described above at the same time. See A common conclusion is that divestment from specified companies can be successfully accomplished without harm to overall portfolio value.

In one study regarding the shifting of funds away from South Africa and into other investments, the authors reported, “We find that the announcement of legislative/shareholder pressure of voluntary divestment from South Africa had little discernible effect either on the valuation of banks and corporations with South African operations or on the South African financial markets. ….”

A web site on Sudan divestment asks the question “Does divestment have a financial cost, and is there a conflict between divestment and fiduciary responsibility?” The answer is below:

“For most individuals, organizations and investment companies, the only cost to divestment is the time it takes to set your divestment policy and implement it. Transaction fees for shifting investments are usually nominal.

Nineteen states and more than 50 colleges and universities, including Harvard, Yale, and the University of California, have determined that there is no conflict between targeted divestment from the “highest offending” companies and fiduciary responsibility. Yale noted that its returns have improved since divesting from their holdings in these companies. Others have noted that recent returns on alternative investments are comparable or even better.

In Vermont, the State Treasurer noted that investments in the “highest offending” companies also poses financial risk. Spaulding explained, “The Committee believed it would be prudent, from a fiduciary position, to refrain from owning securities in companies listed on the Sudan Divestment Task Force Highest Offenders list, because the value of our portfolio could suffer if we continue holding those securities while other investors take affirmative action to sell securities on the list.”

Further, for the typical fund or investor, the size of their investments in the “highest offending” companies doing business in Sudan is a very small percentage of their overall investment portfolio.”

Similarly, the companies sustaining the Israeli occupation of Palestinian land form a very small percentage of United Methodist investment portfolios. Some, such as Motorola, are already underperforming stocks that have had disappointing financial reports. Others, like Caterpillar, are performing well, but there is a potential cost to investors in holding stock in a company widely identified with ongoing crimes like home demolition and uprooting of olive trees in the occupied Palestinian territories. The call to move away from Caterpillar investments is gaining strength, and it is far better to be in the forefront of this movement than to continue holding stocks which will lose their value as more people learn what this equipment is being used for.

Retired clergy and other United Methodists who have devoted their lives to social justice deserve a consistent divestment policy based on all the social principles of the church. Fund managers must divest from occupation-related companies at a time and in a way that minimizes loss to investors. When the cost of shifting funds into different stocks is weighed against the moral cost of allowing our money to be invested in activities we oppose, the choice is clear.