Episcopalians stand up for ethical behavior and justice in the financial world

June 28, 2011

Forty years ago, then-Episcopal Church Presiding Bishop John Hines appeared at a General Motors stockholders meeting to ask the company to quit doing business in South Africa because of that country's policy of apartheid. Today, the church continues to make its voice heard in company boardrooms and in legislative chambers on issues of financial ethics and economic justice.

Episcopalians in several states are battling what they say are predatory lending practices that perpetuate poverty. Various dioceses and the wider church also support investment opportunities such as credit unions, which offer alternatives to payday lenders and foster community development.

Members of the church's Social Responsibility in Investments Committee, with the approval of Executive Council, routinely file stockholder proxies to be voted on at corporations' annual meetings and meet with company representatives on issues ranging from diversifying boards to stopping mountaintop removal in Appalachian mining. And the Episcopal Network for Economic Justice provides education and advocacy on a range of issues, from community investing to employment practices, immigration and health care.

"What I see from the Episcopal Church is there's really a commitment on both sides … using money in a responsible way to support banking and other forms of credit and lending that result in community development as well as the advocacy that's needed to protect against predatory lending and defend people who are at risk of exploitation through unscrupulous financial practices," said Rachel Anderson, director of faith outreach for the Center for Responsible Lending, a research policy and advocacy organization dedicated to preserving household wealth and eliminating abusive financial practices.

The center has supported Episcopal efforts to combat predatory lending in several states, including Mississippi, where faith groups are on the front lines in battling abusive payday lending.

Predatory lending, Anderson explained, "is essentially any kind of lending that takes advantage of people, either for poor or lack of credit history, or limited financial knowledge, and charges rates that are higher really than would be necessary."

Predatory-lending characteristics include excessively high fees and interest and balloon payments where borrowers typically cannot repay loans all at once and must refinance – "anything that triggers a cycle of debt," she said. With mortgages, abusive practices also include charging higher rates in some communities – such as among people of color – or requiring extra costs such as insurance that are unjustified by borrowers' risks, she said.

For payday loans, the annual percentage rate of interest can exceed 300 percent, she said. In a typical scenario, a borrower may pay $45 up front for a $300 loan, received through a post-dated check. "When it's due in two weeks, most people can't pay off the loan," she said. So they refinance: "They don't have $300, but they have $45 and end up basically in a debt cycle."

The interfaith Mississippi Religious Leadership Conference unsuccessfully battled a bill reauthorizing legislation that exempted payday lenders from the rules the banking commission must follow limiting finance charges to a maximum of 38 percent.

Convinced that these avenues of credit helped poor people and created jobs, legislators passed the exemption several years ago, allowing annualized interest rates of 450 percent that were the highest in the country, said Deacon Carol Borne Spencer, conference president and coordinator for outreach mission at St. Andrew's Episcopal Cathedral in Jackson, Mississippi. The reauthorization dropped that to 275 percent and extended repayment times, but the conference wanted the exemption to end completely.

"We lost that battle, but we're not through fighting," said Spencer, who also serves on the board of the Episcopal Urban Caucus. That fight includes educating leaders and potential borrowers alike about the pitfalls of payday lending.

For Spencer, the gospel imperative is clear.

"If one is a follower of Jesus Christ, then the great gift of salvation brings with it the responsibility of making sure all people are part of the kingdom," she said. "People that are vulnerable and living on the margins need to be given every opportunity for the same benefits in life."

"Our imperative is to be on the side of the poor always, and I think Jesus lived his life being on the side of all people, including the poor, bringing them to the great banquet table and saying, 'You deserve a right to live and breathe and move and have the basic necessities of life.'" The poor people being taken advantage of "are being denied their place at the banquet table," she said.

In New Hampshire, the battle against payday lending is part of a larger fight, said the Rev. William Exner, rector of St. Matthew's Episcopal Church in Goffstown. "The story here is predatory politics at the expense of the most vulnerable."

"Obviously the churches are going to have to say something about that," he said. "It's antithetical to the gospel."

A decade ago, supported by the religious community, the state capped lending rates at 30 to 40 percent, but a new proposed bill would encourage "lending rates to devour people at a rate of up to 300 to 400 percent," Exner said. A second proposed bill "says that you can't charge more than 35 percent of one's monthly income for relatively small loans, which is just an astronomical amount of money."

The state also has proposed a budget, cutting essential services "to the bone," he said.

Episcopalians are working with the New Hampshire Council of Churches and the Granite State Fair Tax Coalition to oppose these measures. During budget hearings, Exner was among eight religious leaders who "had covenanted to sit quietly and prayerfully on the third floor of the state house until the budget had passed, praying for a humane budget."

It was "mayhem" around them, with union members screaming on one side and Tea Party members on the other, he recalled. When the session ended, they were prepared to stay and be arrested. Police instead convinced them to be escorted out, so that they would not be banned from the premises and could return to continue their witness.

The group of eight grew to 38 people, lay and ordained, from multiple denominations and religions who have maintained a "quiet, prayerful, thoughtful presence" during hearings, Exner said. "We've had a lot of people approach us and just say, 'Thank you for creating that space.'"

"I doubt we're going to win the legislative end of it [on the budget]," he said, but that won't silence them. "That's what the witness of people of Christ has always done, and this is no time to stop. This is exactly the time to say something."

In Ohio, both Episcopal dioceses (Ohio and Southern Ohio) participated in a successful campaign to overturn exemptions for payday lenders, capping interest at 28 percent in 2008. Voters subsequently defeated a referendum drive to overturn the decision, said Ariel Miller, Episcopal Community Services Foundation executive director in the Diocese of Southern Ohio.

But the legislation didn't entirely eliminate the abuses, she said. "This points up another problem: You get up a head of steam among caring volunteers like church people, but the industries that benefit just keep finding other ways to exploit poor people … and they also do a lot of lobbying."

Cuts in income and corporate taxes in the state led to budget deficits resulting in cuts in services and education, she said. "Both Episcopal bishops in Ohio have been speaking out for two years in favor of responsible revenue policy, that a decent nation and a decent state have a decent safety net and that, if we just keep cutting taxes on people who can afford to contribute to solutions, then poor people are terribly hurt."

Southern Ohio Episcopalians are working to address predatory lending in mortgages and participating in a faith-based community organizing coalition advocating for a Franklin County land bank to stabilize blighted neighborhoods, Miller said.

"Episcopalians tend to be very sophisticated about business and finance. … They tend to be in leadership roles," she noted. "So what can we do to help them to apply their knowledge of these systems to bring about a more just community?"

"It becomes a Christian formation problem: If you're a Christian, how does that change the way you do business? I don't hear a lot of people discussing that question in the churches I go to. But our bishop, Bishop [Thomas] Breidenthal, has told us that he sees civic engagement as one of the peculiar gifts of the Episcopal Church."

"We have to bring our faith into our civics and our workplace relationships," she concluded, "but it has to start in the way we're formed in our churches, that we get some sort of burr under our skins so that we start feeling acutely uncomfortable with conditions that are degrading for other people in our economy."

Responsible investing
In the corporate world, the Episcopal Church has spent four decades submitting shareholder proposals and meeting with companies to promote ethical business practices.

Under SEC rules, company shareholders who meet certain criteria such as owning a certain dollar value in stock for at least a year can submit proposals – proxy statements – that other shareholders vote on at the annual meeting, explained Paul Neuhauser, a member of the Social Responsibility in Investments Committee.

"The basic philosophy is, you take the portfolio as it is and you look at the companies that we're investing in," he said. "Part of our stewardship is not only to make sure that we get an adequate return but also to make sure that unethical actions are not being taken by the companies in which we're invested."

In 1971, the newly formed committee filed and the presiding bishop presented a proxy statement asking General Motors to cease doing business in South Africa because it supported the continuation of apartheid, he recounted. "One of the directors of General Motors, Leon Sullivan, came down off the platform and spoke in favor of it."

This led to the development of the Sullivan Principles – a set of workplace nondiscrimination policies – that GM subsequently got "almost all of the major U.S. companies operating in South Africa to get together and adopt," Neuhauser said. It was "a tremendous step forward at the time. … Eventually we went back to saying, 'You can't really stay in South Africa. You're paying taxes to the government, you're indirectly supporting the entire system.'"

By this time, other churches and "the general society" had joined the effort, he said. "Probably the greatest achievement by the socially responsible investment movement, which I wouldn't say the Episcopal Church started but certainly created real life in, was the ending of apartheid. I do not believe that apartheid would have ended either as soon or without bloodshed the way it did if it weren't for what we did."

The proxies do not garner a majority of votes, nor do they need to, he said. With the apartheid statements, "you had grand celebrations if you got 10 percent. … I'm not sure any social issue has gotten a majority vote."

Some issues the committee raises never reach a vote. "It's an opportunity to talk with management and try and get them to change," he said, citing the committee's success in getting companies to diversify all-white male boards. The statements also educate readers who otherwise might not hear about these issues, he said.

The committee often coordinates its efforts with the Interfaith Center on Corporate Responsibility, which the Episcopal committee's first chair helped found and now involves Roman Catholics as well as mainline Protestant denominations, Neuhauser said.

All the issues the committee tackles reflect Episcopal Church policy, usually in General Convention and sometimes Executive Council resolutions, he said. "If we think it's a terribly important issue and there isn't anything on it, probably because it's a new issue, we'll ask Executive Council whether it's something the church should be doing."

General Convention resolutions make a difference in fostering economic justice, said the Center for Responsible Lending's Anderson, a Lutheran who previously was policy director of the Diocese of Massachusetts' Episcopal City Mission. She pointed to a 2009 resolution (B009) supporting "comprehensive government regulations over economic transactions in the financial and banking sectors, particularly to prevent practices that negatively impact moderate and low income people."

"I think the public as a whole often has the sense that there is a moral component to what's going on in the market," she said, "but they don't always know that the church has really applied a moral ethic to the problems that we're facing now. And so when the church develops a resolution like this, it really makes it very clear."

The church also has taken steps for economic justice with its investments.

In a few cases, it has decided not to invest in particular types of companies. The church doesn't invest in tobacco, for example, said Amy Domini, a former member of the Social Responsibility in Investments Committee and former Episcopal representative to the interfaith center. In her own business life, she helped create a business index with a socially screened portfolio and more recently launched two mutual funds whose investments focus on companies that meet standards of universal human dignity and ecological sustainability.

The church has been more active in supporting community-investment vehicles. A 1988 General Convention resolution (C030) approved establishing "a ministry of community investment and economic justice directed to community-controlled economic development programs of the disadvantaged, with a special focus on land trusts, housing cooperatives, worker-owned businesses and community development credit unions."

Executive Council dedicated $1.5 million to establish a program encouraging dioceses and parishes to support community investing, said Domini, a trustee of the Episcopal Church endowment at the time who later joined the Church Pension Fund board.

Many dioceses and parishes did start community-investment programs or partnered with others, Domini said. New Hampshire, for example, "saved a community development group and backed what is now the New Hampshire Community Loan Fund," she said.

The Pension Fund later began seeking "economically targeted opportunities" that would support both the church's aims and the trustees' fiscal responsibilities, she said. "In the area of what some people call emerging markets in America, they found some real opportunity and have made a number of sizeable investments in real estate primarily that is geared toward revitalizing neighborhoods."

The Diocese of North Carolina helped found the Self-Help Credit Union, with which the Center for Responsible Lending is affiliated, in the 1980s. About five or six years ago, Chad Myers, author of "The Biblical Vision of Sabbath Economics," addressed the diocese's clergy about "how the church can use money that it already has to serve the cause of the gospel in the world," said North Carolina Bishop Michael Curry.

"The wealth of the church … must be at the disposal of God and be used for godly purpose," he said. "A new learning for me was that that's not just about how the church spends its money, but it's also about how the church invests its money."

The diocese decided to invest some of its money in ways that would have a social benefit – about $400,000 in Self-Help, about $120,000 each in the Latino Credit Union and the historically African-American Mechanic and Farmers Bank, he said. Several congregations made similar investments.

"This enables these organizations to lift people out of poverty," he said. They make loans to small businesses that larger banks would not make.

"The interesting thing is that, during the last economic downturn, those investments actually were more solid," he said. "So sometimes doing good is also good for business. … The reality is, you can actually accomplish social good in financially responsible ways. You just have to decide that you want to do it."

In the Diocese of Michigan, said Episcopal Economic Justice Network member Tom Hooper, "we formed our own loan fund, which is just one option to extend loans to small businesses within the diocese." The fund later joined with a preexisting housing loan fund, and the diocese has about $1 million invested in it, he said. Parishes invest in it as well – as much as $700,000 at one point, he said.

Hooper is co-chair of the education committee of the network, whose impetus came from the 1988 community-investment resolution. "Since then, we have expanded to a lot of issues such as immigration," he said. "We have stayed with the community-investment issue and are, in fact, preparing a major effort within the Episcopal Church to encourage community investment. We have conferences annually in conjunction with the Episcopal Urban Caucus."

During the current triennium, the top issues for the network's advocacy committee are immigration, worker justice and health care, said network President and Advocacy Committee Chair Dianne Aid, who also serves on the Economic Justice Committee of the Diocese of Olympia. At General Convention in Anaheim, California, in 2009, the network was involved in a march on Disneyland supporting workers' rights. "Now we're looking towards Indianapolis" in 2012, Aid said.

All these actions, Hooper said, boil down to "an extension of the virtue of love – that you can't have true love without working for justice at the same time."