The CTSA Plans to Divest from the Fossil Fuel Industry
Challenges and Opportunities for Catholic Institutions
In June of last year, the Board of Directors of the Catholic Theological Society of America (CTSA), the largest association of Catholic theologians in the United States, voted to divest from the fossil fuel industry by the year 2025 as a reflection of its commitment to care for God’s creation and the prudent stewardship of its resources. In particular, the CTSA voted to freeze any new investments in what is called the Carbon Underground 200 (the top 100 coal companies and top 100 oil and gas companies in terms of the emissions potential of their fossil fuel reserves) and to divest from those same companies by 2025, which means the society will no longer hold investments (either directly or as part of a commingled fund) in those firms.
The CTSA’s investment portfolio is relatively small, but as then incoming CTSA president (and now current president) Francis Clooney noted at the time, “Ours is a small contribution to a great cause, but we hope that it will also inspire CTSA members to work all the more vigorously toward divestment at their home institutions.”
Last year, the CTSA board established a task force, of which I am a member, to develop a plan for how the society could re-structure its investments to meet the goal of divesting from fossil fuels by 2025. We presented our plan to members of the CTSA at a virtual event last week. Based on the plan’s reception at the event, it will likely be passed by the board at the CTSA’s annual convention at the beginning of June.
I am reporting this because I wanted to share with readers how we came to the decision to divest from fossil fuels and how we plan to implement the decision to divest. My hope is that other Catholic organizations, including institutions of higher education but also any organization affiliated with the Catholic Church or guided by Catholic principles, could learn from our experience.
Both scientific researchers and the Catholic Church’s magisterial authorities insist that fossil fuel-driven climate change is the preeminent challenge facing humankind in the twenty-first century. The warming of the planet threatens to disrupt agricultural patterns and ecosystems, contributing to hunger, refugee crises, violent conflict, and the extinction of species. Warming oceans will lead to more intense tropical storms and rising ocean levels, leading to coastal flooding. The world’s poor will in many cases be most affected by these changes and least able to mitigate them. In his 2015 encyclical Laudato Si’, Pope Francis states that “Humanity is called to recognize the need for changes of lifestyle, production and consumption, in order to combat this warming or at least the human causes which produce or aggravate it” (no. 23).
Francis likewise writes that “at the heart of the worldwide energy system” is “a model of development based on the intensive use of fossil fuels” (no. 23). We all participate in this system to one degree or another, a situation Catholic teaching would refer to as a “social sin” (Pope John Paul II, Reconciliatio et Paenitentia (1984), no. 16) or “structures of sin” (John Paul II, Sollicitudo Rei Socialis (1987), no. 36). Although there may not be anything inherently evil in the everyday actions that contribute to our “carbon footprints,” they nevertheless build up and reinforce the economic and environmental structures that are already disrupting our environment and social life and promise much greater harm in the future. Therefore, we have a responsibility to minimize our contributions to fossil fuel-driven climate change and work toward a transition to renewable forms of energy.
Catholic teaching insists that one of the ways we exercise moral agency in the economy is through investments. As Pope John Paul II wrote in his 1991 encyclical Centesimus Annus, “the decision to invest in one place rather than another, in one productive sector rather than another, is always a moral and cultural choice” (no. 36, emphasis in original). Catholic thinking about investment draws on the traditional concept of “cooperation with evil,” which helps us think through those situations in which we have no choice but to participate in the moral complexities of life in a sinful world. As an earlier CTSA task force (of which I was also a part) wrote in its report recommending divestment to the board in 2022:
There are two broad types of cooperation with evil, formal cooperation and material cooperation. Formal cooperation occurs when one provides moral support for another’s evil action, while material cooperation occurs when one’s own action facilitates the evil action of another. Material cooperation is either immediate or remote depending on whether one respectively assists in performing the sinful act itself or contributes to the conditions making the sinful action possible. While formal cooperation is always unethical, the morality of material cooperation is dependent on the circumstances.
The United States Conference of Catholic Bishops provide a set of concrete guidelines drawing on these principles to guide Catholic investors, the most recent version of which was published in 2021. These guidelines recommend that Catholic investors divest from “companies whose products and/or policies are counter to the values of Catholic moral teaching or statements adopted by the Conference of Bishops,” which in practice means companies that participate in or support abortion, euthanasia, assisted suicide, in vitro fertilization, pornography, and the production of certain types of weapons, as well as those that persistently violate the rights of workers.
The USCCB’s guidelines are more complex regarding investments in companies involved in social sins, such as the fossil fuel industry. Here are the USCCB’s recommendations for that industry:
The USCCB will encourage companies through corporate dialogues, proxy voting, and support of shareholder resolutions to establish greenhouse gas emission reduction goals, provide disclosure around low-carbon planning, and mitigate climate change. The USCCB will consider divestment from those companies that consistently fail to initiate policies intended to achieve the Paris Agreement goals.
The USCCB therefore recommends, as a primary strategy, trying to change company behavior through shareholder activism, and only as a last resort recommends full divestment. Indeed, the company currently managing the CTSA’s investments, Christian Brothers Investment Services (CBIS), takes this approach—shareholder engagement—with its investments in the fossil fuel industry, and as recently as 2018 an ad hoc committee of the CTSA also recommended this approach.
A dilemma faced by the more recent committee tasked with making a proposal on divestment to the CTSA board was whether shareholder engagement was sufficient to fulfill our obligations as good stewards of our resources. Although recognizing the value of shareholder engagement in principle, we concluded that any progress made on the issue of mitigating climate change through shareholder engagement was so halting and minimal that it was not worth the continued effort, and that therefore continued investment in fossil fuel companies was not warranted. As we noted in the report:
The Church’s teaching on social sin suggests that the crucial question here is whether continued investment in the fossil fuel industry truly contributes to the “ecological conversion” of the personal and collective agents involved in the industry or rather perpetuates the underlying structures of sin in the name of “specious reasons of higher order” (John Paul II, Reconciliatio et Paenitentia, no. 16).
We also recognized that as the global economy transitions to renewable energy sources, investments in fossil fuels actually become a financial liability; at some point, the value of fossil fuel reserves will diminish significantly as they are no longer needed for energy production.
Based on these and a handful of other ethical considerations explained in more detail in the report, the committee decided to recommend that the CTSA divest from the fossil fuel industry. This decision was reinforced by the fact that the Vatican itself has divested from fossil fuels, and that other bishops’ conferences, including those in Belgium, Ireland, Austria, the Philippines, Greece, Luxembourg, and Malta have recommended divestment.
Once the CTSA Board approved this proposal last year, the newly appointed task force faced the challenge of figuring out how to transform this resolution to divest from the fossil fuel industry into a practical reality given the constraints of the financial landscape. We found that CBIS was committed to its approach of shareholder engagement and would not work with us on our plan to divest from fossil fuel companies, which meant that we would need to find a different investment services provider.
We likewise found that other investment funds catering to Catholic investors were not able to provide options that included divestment from fossil fuel companies. Ironically, we had to turn to secular investment funds to find options that could meet our needs. There are a handful of secular investment funds that nevertheless provide investment options consistent with the USCCB’s guidelines, and we decided that the most promising was Aperio Group, based in California, which will allow the CTSA to invest in a fund with exclusions based on the USCCB guidelines but also excluding investments in fossil fuel companies.
One of the advantages of Aperio is that it allows a relatively small investor like the CTSA to invest in a customized fund, based on the investor’s preferences, rather than restricting them to what is called a “commingled fund,” a fund made up of the investments of a number of investors. For example, we found that the investment funds catering to Catholics only provided commingled funds, and therefore, although these funds followed the USCCB’s guidelines, they did not allow individual investors to decide for themselves whether to invest in fossil fuel companies or not. Aperio was willing to give the CTSA that freedom, despite being a small investor. Investors with larger funds, like universities, might have more options with more investment funds willing to offer customized investment opportunities.
One challenge we faced is that we could not find an investment fund that would allow us to created a fixed income portfolio following USCCB guidelines. Most institutional investors will put the majority of their funds in an equity portfolio of stocks, which are more volatile but provide higher returns, but still investing a significant portion of their funds in a fixed income portfolio, or bonds, which provide a steady source of income but at a lower rate of return. Aperio only provides investment services in equity investments. As an alternative, we recommended that the CTSA invest its fixed income investments in government bonds which typically have a lower yield than corporate bonds, but are relatively uncontroversial ethics-wise.
From an ethical perspective, one of the most interesting things we discovered was that in addition to the negative screening recommended by the USCCB, that is, excluding investments in companies that profit from unethical activities or products, Aperio offers what you could call “positive screening,” the ability to customize an investment portfolio to shift investments toward companies whose work contributes in significant ways toward the common good or who have made efforts to adopt ethical business practices like sustainability or worker participation. This is an example of the growing trend toward ESG (Environmental, Social, and Governance) investing. We found this aspect of Aperio’s offerings particularly attractive since it values positive contributions toward the common good in addition to avoiding harms to the common good.
Finance and investing can be a dry topic, and working on these proposals with the other members of these committees certainly stretched me intellectually. Even so, I hope this narrative of some of our work can be a starting point for others who work in Catholic organizations and who want to consider divesting from fossil fuels. I also hope it can spur further conversation about the decision to divest and some of the practical challenges that arise as a result of that decision. Any misstatements in the above account should be attributed solely to me, and not to the work of either committee of which I have been a part. If you have any reflections, comments, or questions on divestment, leave them in the comments!
Of Interest…
Last week I wrote about the growing interest of the Vatican and Catholic theologians in artificial intelligence (AI), and I surveyed some of the ontological and ethical questions raised by AI. Yesterday, Bloomberg reported that the Biden administration will be researching the way companies use digital surveillance and artificial intelligence to monitor and regulate worker behavior, practices that potentially violate the rights and dignity of workers. In his recent address on artificial intelligence, Pope Francis stated that people cannot be reduced to data, that we each must be treated as persons with dignity and worthy of respect. The issue of digital surveillance in the workplace is one crying out for analysis from the perspective of Catholic social teaching, so if you are looking for a cutting-edge dissertation topic or an idea for a new monograph, here you go!
Continuing the conversation on AI, Sam Sawyer, S.J., the editor of America Magazine, offers a thoughtful reflection on the limits of language-learning through imitation in an essay on ChatGPT in the current print issue of America.
At Commonweal, theologian Brett Hoover has a reflection on religious disaffiliation in the United States, a topic we have covered here at Window Light (for example, here and here), arguing that it has more to do with political polarization than with a loss in religious belief.
Continuing a conversation I pointed to in an earlier Of Interest section, M. Therese Lysaught (whom I interviewed here in her role as editor of the Journal of Moral Theology) provides a thorough critique of the recent guidelines for gender-affirming medical care for transgender patients published by the US bishops’ Committee on Doctrine, published at the National Catholic Reporter.
In ecumenical news, Religion News Service reports that the United Methodist Church is holding its first in person gathering of bishops since the COVID-19 pandemic and since the denomination split over the issues of the ordination of LGBTQ individuals and same-sex marriage a year ago with the formation of the break-away Global Methodist Church. The bishops will focus on completing the disaffiliation process and charting a path forward for the denomination after the split.
Coming Up…
Later this week, the Journal of Moral Theology will be publishing a special issue on the theme of intersectionality and moral theology, edited by Meghan J. Clark, Anna Kasafi Perkins, and Emily Reimer-Barry. I may offer some comments on the issue in the next edition of Window Light, but I will also be publishing a response to an article from the issue by Hoon Choi at the Catholic Moral Theology blog. Look for it!
This week I will be trying to plan some future interviews for Window Light. The interviews have been the most popular feature of the newsletter, and I have some great ideas for upcoming interviews, so stay tuned. If you have any ideas for interviews or other topics for Window Light, leave them in the comments!
I'm just amazed that a Catholic theological association has enough funds to divest from anything!