The United Church of Christ has some explaining to do.
In 2015, the denomination’s legislative body, called the General Synod, passed a resolution that called on church institutions to “to divest any direct or substantive indirect holdings in companies profiting from or complicit in human rights violations arising from the occupation of the Palestinian Territories by the state of Israel.” The text of the resolution listed — by name — five companies that the church’s money managers should stay away from: Caterpillar, Inc., Motorola Solutions, Hewlett-Packard Company, G4S, and Veolia Environmental.
The same resolution called on the denomination’s money managers to boycott any goods produced by Israeli companies operating in the West Bank. An introduction to the resolution also highlighted a call from Palestinian Christians to stay away from Israeli banks that operated in the West Bank.
Judging from the hoopla surrounding the resolution’s passage, it sure looked like the denomination’s investment bodies were going to divest themselves from the listed companies and stay away from any companies— banks included — that did business in the West Bank. That’s sure how it was played by the folks who argued in favor of the resolution on the floor of the General Synod.
“We ourselves can no longer continue to profit from the violence that is consuming the land that we called holy,” declared Richard Edens, who chaired the committee that brought the divestment resolution to the floor of General Synod. “Thus we are calling and urging all UCC-related entities to stop bringing wood to the fire of this conflict and the violation of human rights. All UCC-related entities are called upon to divest from any direct or substantive indirect holdings in companies that profit from or are complicit in human rights violations arising from the occupation of Palestinian territories.”
John Deckenbeck, Conference Minister of the Central Atlantic Conference of the United Church of Christ and a longtime anti-Israel activist, told delegates, “The resolution calls for divestment across the United Church of Christ of any holdings in a select list of companies that have been found to be benefiting from the occupation. We should not do business or earn pension or investment income from any company that does this.” It was rhetoric like this that made it sound like the UCC was making a sacrifice, putting its money where its mouth was, to demonstrate how seriously it took the issue.
Divestment activists pulled out all the stops to get the resolution passed by General Synod. One particularly ugly moment during the deliberations came when Rev. Ryan Dowell Baum, a UCC pastor from Iowa, told the audience that he supported the passage of the resolution despite coming from “a family of Holocaust survivors and non-survivors.” (“Non-survivors”? That’s a weird phrase to describe Jews who were murdered by the Nazis.) Baum said he shared the concerns of delegates who expressed concerns over the “perceived one-sidedness” of the resolution, but ultimately, he had to support it.
“It does no honor to my family,” Dowell Baum said. “It does no honor to the memory of those who are killed and who are the victims of human rights abuses in Hitler’s Germany to use those abuses as excuses to perpetuate further human rights abuses on other oppressed people and so it is with sadness and with pain that I urge you to vote yes on this resolution.” Embedded in Dowell Baum’s statement is the accusation that Israelis use Jewish suffering endured in Europe to justify their treatment of the Palestinians, as if Israeli security policies had nothing to do with Palestinian violence. (Predictably enough, this aspect of Dowell Baum’s shameful display of costless virtue signaling did not make its way into UCC News’ coverage of the proceedings.)
There was some opposition to the resolution. Rev. Joanne Marchetto, a delegate from the Penn Northeast Conference, warned the General Synod that it had not heard Israel’s side of the story. The conflict is a bitter one she said, with two sides to it. “But it does not seem that we really allow Israel to tell their story or that we have heard their story. We have named the enemy and we do not allow them to have a voice at our table.”
Delegates heard a lot about the suffering of Palestinians at the hands of Israelis, she said, but “we never hear about Israelis who have not been safe in their own schools or homes or buses or how they face many threats of terror from many borders.” The General Synod condemned the occupation, she said, “but we do not want to hear about [Israeli] efforts to end it.”
Marchetto had a point. The resolution expressed more outrage at Israeli Jews who defend themselves than the people who seek to kill and terrorize them. (Read the resolution for yourself here. You’ll find one reference to Hamas, and it’s not a critical one.)
Nevertheless, the resolution passed by a wide margin, which set the stage for a congratulatory press conference. At the conference, Rev. Bernard Wilson, Chairman of the United Church of Christ’s Board, declared, “This resolution puts our faith into action and allows us to move in positive ways to support our partners around the world and I’m Godly proud by the decision of our General Synod to act on this resolution today.”
The overall impression that church officials gave to the public was that the denomination’s investment managers were going to completely divest the funds they manage from the proscribed stocks. And that was pretty much how it played in the press. In early 2016, a few months after the resolution was approved, Deborah Potter, PBS correspondent for the network’s Religion and Ethics News Weekly, declared, “The resolution means that church pension funds will no longer hold stock in companies doing business in occupied territory.”
In the same PBS segment, Katie McCloskey, director of social responsibility for United Church Funds, which manages church endowments (as opposed to retirement funds, which are managed by UCC Pension Boards), said, “Our clients want to invest in a way that they’re spiritually comfortable with, so we have the opportunity to create portfolios that are in line with the way they view their lives.”
Also in that segment, Rev. John Thomas, former UCC President and General Minister, declared, “One of the attractions of the strategy is that we’re not just a relatively small Christian community in the United States taking an action. We’re joining a much broader coalition to amplify the weight of our action.”
Exactly what “action” is Thomas talking about? Four years later, the denomination’s $3.2 billion pension fund (UCC Pension Boards) owns stock in Caterpillar, Motorola and HP, a corporate spin-off from Hewlett Packard. Moreover, United Church Funds — which manages approximately $800 million in assets — owns stock in HP and in two banks that operate in the West Bank, Haopolim and Leumi. It’s all right there in the most recently available schedules of investments posted online by the two institutions.
You’d think that by now — four calendar years after the church’s General Synod voted to divest — the denomination’s money managers would have reconfigured their investments to avoid having anything to do with the proscribed stocks, especially in light of the moralistic, puritanical and urgent tone that church leaders used in selling and promoting the cause of anti-Israel divestment. Boosters of Israel-related divestment sold it as a binary issue, and yet the church is on the “yes” side of owning stocks anti-Israel activists said they shouldn’t.
Despite all the braggadocio from UCC leaders about not profiting from Israeli companies that do business in the West Bank, the denomination’s pension and endowment funds are still doing exactly that.
What’s going on?
There was a dirty little secret that high-ranking church officials, activists and money managers in the UCC knew all along. There was simply no way the denomination’s more than $4 billion in assets could be managed without including holdings in the proscribed companies.
Angelica Harter, a leader of the United Church of Christ Palestine Israel Network, gave a hint that there were some real obstacles to implementing the General Synod’s decision at the post-vote press conference. “We’ve been in conversation with the United Church Funds and Pension Boards as to how it [the resolution] would be implemented and we’ll be continuing to do that,” she said.
Fiduciary Responsibility of Pension Fund Managers
One obstacle is federal law regarding the management of pension funds. Under the statutes of the Employment Retirement Income Security Act, or ERISA for short, which is enforced by the U.S. Department of Labor, pension fund managers must work “solely in the interest of plan participants and their beneficiaries, with the exclusive purpose of providing benefits to them.” In other words, pension fund managers cannot base their investment decisions on politics, but only on risk and return.
This reality was mentioned in the text of the resolution itself, which declared that proponents of divestment had tried to speak with people from the United Church of Christ Pension Boards. “Thus far, its staff has not been willing to engage in dialogue on the topic,” the resolution declared. “Its executive has stated on the basis of legal opinion that its fiduciary responsibilities do not allow it to make investment/divestment decisions in response to Synod votes.”
UCC Pension Boards reaffirmed its fiduciary responsibilities to its members in a statement issued the same day the UCC’s General Synod passed the divestment resolution. “As a pension plan, we must always work in members’ best interests,” said President and CEO Michael A. Downs. “For PBUCC, this means responsible stewardship of the retirement assets members have entrusted to us.”
To be sure, United Church of Christ’s pension fund managers can hire outside consultants to tell them that investing in companies that do business in the West Bank exposes them to financial risk because of the controversy surrounding the companies in question, but that opens a can of worms.
If the folks at Pension Boards hire a consultant who conveniently tells fund managers that they shouldn’t hold any funds in companies such as Motorola, Hewlett-Packard, HP, or Caterpillar because of their controversial connections to the West Bank, then what about the risk of controversy surrounding Apple and Alphabet (which owns Google)? These two companies do business in China, which is currently running concentration camps for Muslims, demolishing Christian churches, and using the internet to spy on its citizens by linking search queries to people’s individual phone numbers.
Does anyone honestly think that Apple and Alphabet — two companies that the UCC (and every other mainline church) have invested heavily in — are not somehow complicit in China’s human rights abuses? Of course not. Maybe mainline human rights activists will get around to dealing with human rights abuses in China. (Don’t bet on it.) But if they do, will the ensuing controversy over the relationship between these companies and the Chinese government represent a financial risk? Would church money managers really be willing to walk away from some of the most lucrative investments of the modern era? Probably not.
What about the UCC’s non-pension funds? These funds, managed by UC Funds, are not subject to ERISA, but they are subject to another regulatory structure called The Uniform Prudent Management of Institutional Funds Act, (UPMIFA). This is not a federal law, but a law enacted by multiple states in the United States so as to allow for uniformity in state regulation of a particular segment of the economy. UPMIFA, which has been approved by at least 49 states including New York (where the UCC’s fund managers operate), gives non-profit institutions greater leeway in determining what stocks it can and cannot hold for moral and ethical reasons.
Nevertheless, both UCC Pension Boards and UC Funds are constrained by another reality: much of their money is invested in mutual funds operated by outside money managers who are bound by the terms of the prospectuses they use to solicit investments. The UCC’s General Synod can pass all the resolutions it wants and the people who manage UCC’s investments can mouth all the pieties they want, but the fact is they have no control over how outside investment firms manage their index funds.
Directly Held Stock Versus Indirectly Held Stock
Both PBUCC and United Church Funds do have direct control over the stocks and bonds they own outright, or “directly.” The schedule of investments for PBUCC for Sept. 30, 2018 indicates that out of its $3.3 billion in holdings, it owns over $1 billion in common stocks. And the schedule of investments for UC Funds indicates that it owns over $450 million in common stocks out of more than $800 million.
This is where things get interesting, particularly with the denomination’s pension funds. The Sept. 30 , 2019 schedule of investments for the UCC’s Pension Boards includes a number of proscribed companies in its inventory of common stock over which it has direct control. Included in this list are more than 15,000 shares of Caterpillar, more than 33,000 shares of Hewlett-Packard, almost 29,000 shares of HP, and more than 4,000 shares of Motorola.
What are these directly owned stocks doing in the UCC Pension Funds portfolio? As stated above, the UCC Pension Boards — which manages $3.3 billion — was entirely exempt from the demands of the 2015 resolution. The General Synod simply did not have any authority over what Pension Boards did with its money. This was acknowledged by Rick Walters, Associate General Counsel and Director of Corporate Social Responsibility for UCC Pension Boards, in a January 3, 2019 email to CAMERA in which he stated, “while we take General Synod resolutions seriously and more than live in substantial covenant with them, the Pension Boards is not bound by them.”
That still leaves us with the holdings of the United Church Funds. According to the schedule of investments for September 30, 2018, UC Funds owns 32,000 common shares of HP, a spin-off from Hewlett-Packard, which was listed in the resolution as a proscribed stock. Like its corporate ancestor, HP is blacklisted by the BDS movement. The names of a number of Israeli banks are also listed in the schedule of investments, but these are included in the assets of mutual or mixed funds and are not held directly by the UC Funds.
That leaves us with a niggling question. Why does UC Funds own any shares of HP? Isn’t that a proscribed stock?
Interestingly enough, in its coverage of the UCC’s divestment vote Huffington Post reported that the General Synod’s divestment resolution could be ignored by both the PBUCC and UC Fund managers: “The director of each group also can decide not to divest, as can other church bodies, churches and members.”
The website of UC Funds indicates that it can ignore General Synod resolutions if it wants to, declaring that “other settings of the Church are allowed to hold differing views and practices on all non-constitutional matters.” UC Funds has also declared that it “has recently aligned itself” with the divestment vote of 2015. “Aligned” itself? That sounds a lot like the Pension Board’s promise to “live in substantial covenant with” the General Synod’s pronouncements.
Did the divestment resolution passed by the General Synod in 2015 mean anything? Did it have any teeth at all? Or was it for all just show?
PBUCC Promotes Fund With Problem Stocks
Things get even weirder when we look at the stock holdings of the Northern Trust Global Sustainability Index Fund. In 2016, Walters pitched this fund to investors in a Youtube video posted online on June 10, 2016.
In the video, he asked potential investors, “Are you looking for an investment option that is sensitive to environmental issues, social and human rights, and good corporate governance?” In the same video, he said PBUCC was offering the fund to investors in an effort “to respond covenantally and faithfully to the prophetic voice of the United Church of Christ within the bounds of duty and loyalty to our plan members.”
In this article, Walters touted PBUCC’s decision to offer the fund as a response to a 2013 General Synod resolution calling on the church to divest from fossil fuels. (In the same article, Walters reports “PBUCC has eliminated its holdings in thermal coal and tar sands, thus reducing the carbon footprint of the portfolio by 60 percent.”)
There’s just one irony. The fund PBUCC is pitching to its pension fund members is currently invested in companies proscribed by the 2015 General Synod vote regarding Israel.
According to the fund’s schedule of investments for September 30, 2018 (available here), the fund owns stock in Caterpillar, Hewlett-Packard, HP, Motorola and three Israeli banks: Bank Hapaolim, Bank Leumi, and Mizrahi Tefahot. The holdings aren’t huge, but the fact is, UCC’s Pension Boards told retirees that if they wanted to be socially responsible investors, they should invest in a fund that had seven stocks in its portfolio that were proscribed by the General Synod’s 2015 vote. Talk about being “in covenant” with the UCC’s prophetic voice!
In an effort to confirm that the index fund promoted by PBUCC was the same fund listed on Northern Trust’s website, CAMERA contacted Walters and asked him if it was the same fund. Walters refused to answer.
“I’m not going to tell you,” he said.
When informed that the fund in question had a number of stocks that were proscribed by the 2015 divestment resolution, Walters said, “Your information is wrong.” When asked how it was wrong, he said, “I’m not going to tell you.”
The upshot is that UCC money managers are still invested in proscribed companies four years after their denomination passed a resolution calling on them to get out of these stocks. No one should be surprised because even if the denomination’s money managers had to do what General Synod told them to do (and they don’t), the body gave them another loophole — indirect holdings.
Folks who looked closely at the resolution would see a couple of weasel words that gave the denomination’s money managers an out. The resolution states calls on church entities “to divest any direct or substantive indirect holdings.”
The word “direct” would apply to equities held directly by UCC money managers and “indirect” refers to funds managed by outside money managers. As we see above, as of Sept. 30, 2018, the United Church of Christ’s Pension Boards still has a number of stocks that were proscribed by the General Synod vote in 2015, but that this vote had no authority over what UCC’s pension fund managers would do.
Now, onto “substantial indirect holdings.” In a 2016 document titled “Policy for Faith and Finance” the PBUCC acknowledges that “modern non-profit institutional investment is now primarily in commingled and non-equity instruments. This means it is not practical or possible to divest a single company out of the many within each fund. The General Synod has affirmed that such action is indeed not actionable by incorporating exclusions of commingled funds into its two latest resolutions on divestment.”
That means the denomination’s money managers can still hold stock through index funds they do not directly manage. “The resolution specifically excluded comingled funds, termed ‘substantial indirect’ investments,” explained Walters in a Jan. 3, 2019 email.
The modifier “substantial” suggests there is an upper limit to how much prohibited stock an index fund can have before UCC money managers are forced to get out, but if the denomination has issued a clarification of what “substantial” means in numerical terms, it hasn’t done a very good job of publicizing it. And given the fact that mutual funds are managed with an eye toward diversity and not putting all of one’s eggs in one basket, it’s entirely possible that any limits on the ownership of problem stocks that are imposed on an outside fund would be well above what the fund would ever purchase. In other words, the bar could be set high enough to render the issue moot.
UCC Can Demonstrate Compliance, But Hasn’t
A cursory review of the websites of both the PBUCC and the United Church Funds indicate there hasn’t been any announcement from UCC’s money managers that they have divested from the companies listed in the 2015 resolution. The General Synod passed the resolution, everyone cheered, but nobody in the denomination has said very much about its implementation.
The denomination held a press conference when its General Synod voted to divest, but when was the press conference that announced that the UCC’s money managers had actually divested? As stated above, when it came to fossil fuels, PBUCC reported that it has reduced the carbon footprint of its holdings by 60 percent. But aside from touting its investment in Siraj, a Palestinian investment fund that by the way, does a lot of business with Israeli companies that build Jewish homes in the West Bank (which would seem to contradict the purpose of the 2015 divestment resolution), PBUCC hasn’t provided much information about its compliance with the 2015 vote.
In order to determine the extent to which UCC funds have complied with the General Synod’s 2015 resolution beyond a binary, yes/no assessment, the public would need to know how much stock it held before and after the vote. Maybe the UCC investment funds have a lot fewer shares in the proscribed stocks than they did before the divestment vote. That would count in the denomination’s favor. But UCC officials aren’t talking.
When this writer suggested to Rick Walters from the UCC Pension Boards that UCC money managers could demonstrate their compliance with the 2015 General Synod vote by releasing this information, his response was “We’re not going to do what you want us to do.” He also said that the information in question was “all publicly available.”
In retrospect, it sure looks like the denomination’s staffers wanted to squeeze as much publicity as possible about the 2015 divestment resolution when it was approved, but then wanted everyone to forget about it afterwards.
The denomination made a great show of the resolution’s passage. But compliance?
Not so much.
So there you have it. The denomination’s money managers in New York and the church leaders in Cleveland have tried to walk a fine line between reminding people that the resolution was not enforceable and keeping its unenforceability on the down low, because if everyone knew, it would kind of undermine the moral impact of the resolution’s passage.
Four calendar years after the passage of the divestment resolution at the UCC’s General Synod, there is no objective proof or measure available for people to determine the extent to which the denomination’s leaders have achieved the stated goal of the resolution — to stop the UCC from profiting from companies that it believes are harming the human rights of Palestinians. In fact, there’s a lot of evidence that suggests things haven’t changed. The names of proscribed companies still show up on the relevant schedules of investments almost four years later.
The denomination set up a formal system or set of rules on how to deal with Israel-related investments. At first glance, it looked like this formal system would demand action and sacrifice from the UCC, but in practice, the rules were so riddled with escape hatches and loopholes that they were essentially meaningless. They demanded nothing from the UCC. The only rules that mattered were those that the UCC’s General Synod declared Israel had violated.
That’s probably the way the people involved in the fiasco wanted it. Despite everything, when it comes to Israel, UCC money managers are still able to invest as pretty much as they always did even as they talk about being in “covenant” with the General Synod or “aligned” with its resolutions. Despite this, anti-Israel activists in the denomination, can nevertheless claim their church is part of the BDS movement. And the denomination’s leaders in Cleveland bask in the media attention the BDS controversy has generated for their dying church. Everybody got what they wanted without paying any costs. The only people who paid any cost for the UCC’s actions were Jews whose homeland was defamed as the charade played out.
The bottom line is what it has been for a long, long time.
Rules are for Jews, not for Christians who judge them.