The Role of the Investments Department

The Investments department’s role is to seek to attain superior returns while incurring prudent levels of risk for General Board managed funds. The department operates in accordance with the Investment Strategy Statement established by the fiduciary committee of the board of directors. Department responsibilities include selecting investment managers, monitoring performance, screening investments, engaging in advocacy and managing the Positive Social Purpose Investment Program.

Selecting Managers

The General Board engages the services of a variety of independent investment managers to manage the various funds (excluding funds invested in the Positive Social Purpose Investment Program). The department identifies and selects investment managers using a rigorous process.

Potential new investment managers undergo a formal due diligence process. The selection procedure involves completing a comprehensive questionnaire, extensive interviews and an on-site evaluation of the investment managers’ staffing and capabilities. Investment manager selection is based on both quantitative and qualitative analyses that assess the firm’s potential for producing excess returns compared to a prospective performance benchmark. Other criteria used in the evaluation process include professional experience, investment philosophy and process, operational capabilities and fees. Before engaging the services of an investment manager, our staff develops a comprehensive investment mandate that outlines the duties and responsibilities for managing General Board funds. The mandate includes duties required to assure that investment portfolios comply with the Social Principles of The United Methodist Church, as delineated in The Book of Discipline. The Social Principles can be found on The United Methodist Church’s Web site at http://archives.umc.org/interior.asp?ptid=1&mid=1686. A complete list of the General Board’s external investment managers is provided on our Web site at www.gbop.org/sri_funds/managers.asp.

Monitoring Performance

The investment performance for each individual investment manager and each fund as a whole is monitored on a daily, monthly, quarterly and annual basis. Investments are also evaluated to ensure that they are in compliance with each investment manager’s specific mandate and with the Social Principles.

Monitoring is reported internally within the department, to senior level management, to the fiduciary committee and to participants through the General Board’s Web site. Participants are encouraged to visit the SRI & Funds pages for periodic updates.

Screening Investments

The Investments department is responsible for ensuring that each investment decision adheres to the Social Principles. Screening is an ongoing process that involves monitoring equity and fixed-income holdings to ensure that the General Board does not participate in businesses that derive significant income from the sale, production and/or distribution of: tobacco, alcohol, pornography, weapons and gambling. Investments are monitored on a continual basis to ensure they remain in compliance with the General Board’s Socially Responsible Investing Guidelines.

Engaging in Advocacy

Through social advocacy, the General Board strives to influence companies to adopt business practices in alignment with the Social Principles. The Investments department practices social advocacy through two separate means: corporate engagement and proxy voting. The department uses corporate engagement to dialogue with corporations on important social issues. These issues range from fair labor standards to corporate governance. In addition, the department exercises the General Board’s shareholder rights by voting on resolutions through proxies for all companies in which the General Board invests. The Proxy Guidelines provide direction to the department for applying the Social Principles when voting proxies.

Managing the Positive Social Purpose Investment Program

Another major responsibility of the Investments department is to manage and administer the General Board’s Positive Social Purpose Investment Program, which strives to make a positive social impact in the U.S. and world community. Examples include financing the development of affordable housing and other projects in underserved communities. The Investments department works with other nonprofit organizations dedicated to the creation, rehabilitation or preservation of affordable housing and to the improvement of disadvantaged communities. These partners source potential new investments for the General Board. The department performs thorough due diligence for each potential investment. All loans in which the General Board participates are intended to produce competitive rates of return commensurate with the risk assessment for each qualifying project. The program has expanded to include charter schools in the U.S. and microfinance institutions that make small loans to individuals in developing countries.

Retaining an Experienced Investment Team

The Investments department is staffed by seven investment professionals and three professionals with corporate relations backgrounds. Our Investments staff has broad industry experience in banking, investment management and corporate relations. The staff collectively holds eight master’s degrees and two Chartered Financial Analyst certifications.