How and where we choose to invest can forcefully proclaim our UU ideals. Investment screening is the practice of excluding investments from portfolios based on social, environmental and governance criteria. It also includes weighting portfolios towards companies that perform better on these criteria and avoiding poor performers. Screening criteria are designed to represent UU values, as expressed in General Assembly Resolutions and Resolutions of Immediate Witness, Board resolutions and the UUA Purposes and Principles. The UUA employs Jantzi Sustainalytics, which specializes in SRI issues, to rate over 1,000 U.S. companies based on these values and to advise on which companies to exclude from the portfolio.
Screening is most applicable to investments in individual securities, but less so to pooled investments such as mutual funds and private co-mingled funds. Some of the pooled investments included in the UUCEF do no screening whatsoever. The Fund’s assets that are invested in pooled investment vehicles represent only a portion (and depending on the pooled vehicle, may represent only a small portion) of all investors’ investments in such vehicles. As a result, it is not possible for the UUA to apply the SRI Guidelines and screens directly to the holdings of the pooled investment vehicles in which the Fund invests. However, while the UUA cannot control the selection of specific investments by pooled vehicles, the Investment Committee endeavors, in connection with selecting the pooled vehicles in which the Fund invests, to choose, to the extent available and with due regard to investment performance, pooled vehicles that apply SRI policies and restrictions similar to the UUA’s SRI Guidelines. Currently approximately 73% of the Fund’s total investments are in pooled investments, of which 21% are in vehicles with SRI policies. Overall, approximately 57% of the Fund’s investments are subject to some degree of SRI screening.
Socially conscious investors seek to own financially strong companies that make positive contributions to society. This is often termed “positive” social screening. With a portion of its US equity investments, the UUA favors investing in companies that perform better on employee and community relations, environmental practices, safe and useful products and demonstrated respect for human rights in all countries where they operate. The UUA also actively avoids investing in companies whose products and business practices are harmful or unethical. This is termed “negative” screening.
Most companies, like people, have a mix of strengths and opportunities for improvement. Companies’ mixed records can make it challenging for investors (and their managers) to determine whether they meet their social values, as well as their financial objectives.
A growing number of benchmarks, however, illustrate how values-based screens can be used to meet clients’ social and financial objectives. These include: the Dow Jones Sustainability Indices, the Calvert Social Index and the MSCI ESG Indexes. All three have generated strong financial returns while meeting various social expectations.
The annual Business Ethics list of 100 Best Corporate Citizens provides another universe of companies widely recognized for aspects of their corporate citizenship. Reviewing the components of these benchmarks to see which companies are, or are not, included may provide some helpful background in implementing the social screens below. Profiles by the Interfaith Center for Corporate Responsibility (ICCR), and other groups report on recent controversies.
For many social investors, a pattern of controversies, and whether a company reacts defensively to a controversy or seeks proactive solutions, are more significant indicators of concern than one particular incident. For instance, certain companies such as ExxonMobil, Monsanto, and Wal-Mart face controversies on numerous fronts, and are excluded from most social investors’ portfolios.
UUA Screening Guidelines
The three categories of Unitarian Universalist Association (UUA) screening guidelines: environment, social, and governance. The UUA also negatively screens companies sell significant amounts of tobacco, weapons, firearms or are involved in Sudan. All screens are grounded in our Purposes and Principles and UUA Resolutions and Actions of Immediate Witness.