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Portico Implements New ELCA Human Rights Screen

Apr. 14, 2019

This month, the ELCA’s largest institutional investor, Portico Benefit Services, announced two recent actions supporting the 2016 Churchwide Assembly resolution, Justice for the Holy Land Through Responsible Investment.

First, on April 1, Portico implemented within the ELCA social purpose funds the ELCA’s new Political and Civil Human Rights social criteria investment screen approved last year by the ELCA Church Council. This screen provides guidance to Portico and other ELCA investors wanting to take investment action relative to the ELCA’s human rights position.

Since approval of the screen, Portico has established a comprehensive process for identifying and screening companies from the ELCA social purpose funds, and began applying it April 1. Now, companies will be screened out if they’re identified as involved with a controversy in an occupied or disputed territory where the denial of legal and political human rights measures “severe” or “very severe.”

For 2019, the screen added one company to the list of those excluded from ELCA social purpose funds. While Portico can report the number of companies identified by a specific screen, it isn’t able to name specific companies by screen as this information is considered proprietary research by Portico’s screening consultant.

“Because the risk of doing business in occupied and disputed territories can be significant,” says Erin Ripperger, Portico’s senior socially responsible investment analyst, “we didn’t expect many companies to meet the requirements. Screening may identify additional companies as we refine our process over time. We also expect to create significant impact through our advocacy work as shareholders and by making investments that promote positive economic development in select occupied and disputed territories.”

Details about the screening process

Also this spring, Portico joined Wespath Benefits and Investments (affiliated with The United Methodist Church) in shareholder corporate dialog with Caterpillar (a company whose products have been associated with the West Bank occupation), to encourage the strengthening of its human rights policy and related disclosures. As Caterpillar reviews its policy, Portico and Wespath are encouraging company leaders to adopt best practices and apply them throughout their value chain, including conducting assessments to identify areas posing human rights-related risk.

These recent actions complement Portico’s 2017 positive social impact first (SIF) investment in Bank of Palestine, an innovative, socially responsible institution with the widest branch network in Palestine and a presence dating back to 1960. Our $1 million, five-year certificate of deposit made through the three ELCA Social Purpose Balanced funds and the ELCA Social Purpose Bond fund is designed to support economic development and affordable housing opportunities in Palestine.

Bank of Palestine provides financing to micro-, small-, and medium-sized enterprises in commerce, services, industry, agriculture, tourism, and construction. The micro-entrepreneur segment typically has limited access to financing yet is a growth engine in emerging economies like Palestine. Using Portico’s $1 million investment, Bank of Palestine has made about 200 micro-loans in the West Bank to businesses like schools, tailors, print shops, and therapists — with 60 going to women business owners. This lending has, in turn, created over 400 new jobs with 30% going to women.

Portico’s president and CEO, Rev. Jeff Thiemann, describes Portico’s actions as a direct response to calls for action from the 2016 Churchwide Assembly, and encourages ELCA retirement plan members to take pride in this work.

“On behalf of all our retirement plan members,” says Thiemann, “we’re using shareholder advocacy to throw a spotlight on the financial risks a company assumes when involved with the most egregious human rights controversies. On behalf of those members who choose our social purpose funds, we’re now screening out companies significantly involved with these controversies, and seeking investments in companies able to foster economic development and strengthen community within disputed and occupied territories.”

How Portico Implemented This New Screen

The language of an ELCA social criteria screen provides high-level guidance. Portico takes that guidance and creates specific screening criteria to identify and target companies. “Choosing criteria is a balancing act,” says Ripperger. “Portico designs its screening process and criteria to honor the intent of the screen, while also maintaining a fiduciary responsibility to the ELCA retirement plan and its members.”

The new human rights screen calls out the importance of not investing in corporations benefiting from the most egregious denial of the rights of people to participate in legal and political decisions affecting them.

  • It defines the problem — that equal access and participation in legal and political decisions can’t happen when they occur in conflict-affected countries, especially disputed or occupied territories.
  • And it recommends solutions — avoiding investments in offending companies through screening, and investing in companies that promote positive economic development.

Using guidance from this screen, Portico employed its screening consultant to create a comprehensive method for identifying companies in violation of the screen and applying that method annually. The consultant recommended a controversy-based screening approach, similar to that currently being used to implement the ELCA Environment screen.

  1. First, the consultant investigates human rights controversies involving companies, focusing specifically on disputed or occupied territories where national or international laws, regulations, and/or commonly accepted global norms allegedly have been violated. This list currently includes: Abkhazia, Crimea, Indian Kashmir, Negorno-Karabakh, Northern Cyprus, Pakistani Kashmir, Somaliland, South Ossetia, Tibet, Transnistria, Western Sahara, and occupied territories in the Israel/Palestine region.
  2. Next, it applies a scoring process to each company controversy, taking into account key factors such as the severity and size of the negative impact, the type of controversy, and its current status.
  3. Finally, it identifies companies with controversies ranked “very severe” or “severe,” and reports them to Portico as candidates for screening from the ELCA social purpose funds.