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David Zellner, Westpath, on the United Methodists' approach to values-driven investing

Dave Zellner is Chief Investment Officer at Wespath Institutional Investments, which oversees over $26bn in assets for the United Methodist Church in the United States, and also Chair of FaithInvest. He discusses how the United Methodists approach their investment responsibility and the opportunities and challenges of faith-aligned investing.




CONTENTS


00.00 – 00.39: Introduction:

00.40 – 04.29: Organisation & background

04.30 – 10.17: Values & Methodology

10.18 – 18.49: Impact Investments

18.50 – 24.29: Broadening service offerings

24.30 – 30.39: Looking forward


PODCAST

The interview is also available for you to listen to as a podcast.


 

OVERVIEW

  • The United Methodists approach their investment responsibility by focusing on fiduciary duty to the beneficiaries while making a significant effort to align investments with the beliefs of the Church:

    • Work towards a sustainable economy framework: Social Cohesion, Prosperity for All, Environmental Health

    • Incorporate the sustainable economy goals within your investment process and – to the extent possible – with your managers

    • Avoid, Engage, Invest – start by excluding companies in clear violation of your principals, engage with your investments to improve them, proactively invest in making the future better

  • Wespath manages $24 billion for the United Methodists and related parties in alignment with the United Methodists (such as The Evangelical Lutheran Church in America)

    • Investments based on United Methodist Church Social Principles

    • Over 120 faith-based clients in the OCIO program

    • Combination of retirement, foundation and employee benefit assets

    • Centrally managed funds provide US, international, fixed income, inflation protection and specialized exposures to clients

    • Because of the make-up of its clientele (all faith-based not-for-profits), Wespath is not registered with the SEC nor is it subject to DOL oversight or ERISA

  • Wespath’s staff consists of 24 people in four teams:

    • Investment management which oversees all portfolios and client reporting

    • Impact Investment overseeing internal and external impact portfolios

    • Sustainable Investment Services which spearheads Wespath’s significant commitment to shareholder engagement

    • Institutional Investment Services – which provides sales and client support for the OCIO efforts

  • In every asset class, Wespath endeavours to deliver top quartile risk-return results while incorporating faith-based directives:

    • All managers are encouraged to adopt the PRI standards and are engaged on progress and improvements

    • Public markets managers are given an exclusion list (which excludes things such as weapons, alcohol, tobacco, gambling, adult entertainment) and encouraged to incorporate the concepts of Sustainable Economy within their processes

    • 5% of the portfolio is managed internally in a lending programme to support affordable housing; this is decades-old programme that aims for market-rate returns

    • Engagement is done in coordination with various partner groups and includes proxy voting efforts



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