Monday, June 29, 2020

A report on a conversation about divestment from military manufacturers with the Archdiocese of Baltimore


Friends,

  On May 11, 2020, five Concerned Catholic Activists sent a letter to Archbishop William E. Lori setting out reasons -- theological, moral, political, environmental, and practical -- for divesting Archdiocesan funds from weapons manufacturers. On June 19, 20, and 21, some members of the group fasted and witnessed in front of the Basilica on Cathedral Street in Baltimore, calling for divestment. This call echoed Pope Francis' "Journeying Towards Care for Our Common Home," issued June 18, 2020, which informed Catholics to "shun companies that are harmful to human or social ecology," such as weapons manufacturers.

  On June 23, Archbishop Lori responded.  It seems he took the original letter very seriously, and took time to investigate our concerns and to formulate his response.  Through this campaign, we have discovered that “For example, certain funds mentioned in your letter have been fully divested: Blackrock Equity Dividend Fund was fully liquidated in 2015 and Dodge & Cox International Fund was liquidated in 2016.

  I believe the original letter and the subsequent fast and witness successfully challenged the Archdiocese of Baltimore to conform to socially responsible investing.  Note the Archdiocese of Baltimore was the first diocese established in the United States, in 1789.

  We asked for a conversation on divestment, and we succeeded in this quest.  In fact, Archbishop Lori suggested contacting the chief financial officer. The group is still processing this response, but will presumably have dialogue with him in order to follow further divestment of funds involved with weapons manufacturers.  I hope this action places some wind in the sails of the divestment movement.

Kagiso, Max

ARCHDIOCESE OF BALTIMORE

320 CATHEDRAL STREET • BALTIMORE, MARYLAND 21201 • 410-547-5437 • FAX: 410-547-8234

OFFICE OF THE ARCHBISHOP

Mr. Jeff Ross, et al. 515 Collins A venue Baltimore, Maryland 21229

June 23, 2020

Dear Jeff, Gary, Suzanne, Max, and Janice,

Thank you for your recent letter and for your observations and questions about Archdiocesan investments. This response has taken longer than anticipated. Assisting parishes, schools, other Catholic institutions, and the Archdiocese itself, to respond to the financial challenges of these days has been time consuming, especially for my colleagues in the fiscal office whom I consulted in answering your questions. Please keep these good, hard-working people in your prayers.

With the goal of fiscal accountability in focus, you have looked into the question of Archdiocesan compliance with the standards of socially responsible investing (SRI). 1bank you for your analysis. In the following paragraphs, I shall try, as best I can, to clarify the issues you have raised.

 As your letter indicates, the United States Conference of Catholic Bishops (USCCB) issued guidance on SRI. Published in 2003, it comprises four broad areas: 1) Protecting Human Life; 2) Promoting Human Dignity; 3) Reducing Arms Production; 4) Pursuing Economic Justice. Soon after the publication of this guidance, the Archdiocese undertook to revise its investment practices. To this day, we continue to make changes and improvements. Currently, the USCCB is updating its guidance. Once issued, we will again conduct another thorough review of investments. In any event, I regard all four pillars of SRI as a very serious matter and it is something in which I firmly believe. Thus, I agree with your stance that we cannot simultaneously entrust ourselves to God while seeking financial security through investments in the manufacture of death-dealing products.

   Your letter specifically asks whether we have ever determined the extent to ~which we have invested any archdiocesan, parish, or school funds in the weapons industry. We have indeed made that determination. Over time, we have been alert, not only to investments in the weapons industry, but also to investments in companies and

Mr. Jeff Ross, et al. June 23, 2020 Page2

industries that do not align with the four broad areas of SRI. However, not all investments in the Archdiocese are under the direct control of the Archdiocese, as John Matera, the Chief Financial Officer of the Archdiocese explains in the summary that follows:

   The first thing to understand is that there are two distinct investment policies. Investments that are under the direct control and fiduciary responsibility of the Archbishop of Baltimore and Investments that are not under direct control of the Archbishop.

The investments under direct control of the Archbishop are included in the audited statements entitled Combined Financial Statements of Central Services of the Roman Catholic Archbishop of Baltimore (https://www.archbalt.org/wp-content/uploads/2020/01/2019-Central-Services-of-RCAofBaitimore-FS-FinaI.pd). These investments are in large separate trusts such as Lay Pension Plan, Priest Pension Plan, General Insurance Fund, Health Insurance Fund, etc. The Archdiocese does not hold any individual securities. All investments are in funds. Because these trusts are under common control of the Archbishop, we have the ability to open our own funds with asset managers. This affords the Investment Committee to select what they believe are the best asset managers in their respective asset classes. As a condition to investment, asset managers must adhere to social screening consistent with Catholic values as outlined by the USCCB.  Every quarter, the investment asset managers send a letter to the Archdiocese certifying that they do not own any companies that earn revenue on activity contrary to our values. They identify each company that is included in the normal mutual fund but not included in our funds, as well as if any replacement company was purchased or not. This practice has been in place since 2012. The process works well and we are 100% compliant with the USCCB guidance.

  The investments not under direct control of the Archbishop are a little more difficult to manage by way of compliance. Each individual parish is a separate corporation. Fiduciary responsibility lies with the parish leadership of the corporation. Rarely does a parish have enough savings that would allow it to invest in mutual funds in the manner that the Archdiocese does. An investment fund manager has minimums before he/ she will manage a separate fund outside of the larger mutual fund. To address some of these, the Archdiocese has implemented parish/ school investment policies.

Mr. Jeff Ross, et al. June 23, 2020 Page3

To be clear, the investments under the direct control of the Archdiocese are completely compliant with the USCCB guidelines.

As noted above, however, some investments are only indirectly under Archdiocesan control. It may be helpful for me to explain further how this complex structure developed and how it In the course of doing just that, I shall also address your concerns about specific investments.

Parishes and schools with ample savings, for the most part, handle their own investments. Working with parish finance councils and business managers, the Archdiocese strongly encourages such parishes and schools to invest in ways that are SRI compliant. Most parishes and schools, however, do not have the financial bandwidth to make investments on their own and to pay brokerage fees. To assist such parishes and schools, in 2000 (prior to the USCCB SRI Guidelines), the Archdiocese of Baltimore created the Inter-Parish Loan Fund (IPLF). The idea was to pool parish and school investments into combined funds in order to have access to more markets at lower fees. This program currently includes 52 parishes and/ or schools. As a result, there are 52 different decision makers within the program. Therefore, making changes in this program is somewhat more challenging. However, the IPLF Board is committed to offering only SRI options within the program, while continuing to have a broad range of asset categories from which parishes and schools can choose to create their own portfolios. Currently, a majority of those investments is SRI; the IPLF Board seeks to transition out of the remaining funds that are not fully compliant. For example, certain funds mentioned in your letter have been fully divested: Blackrock Equity Dividend Fund was fully liquidated in 2015 and Dodge & Cox International Fund was liquidated in 2016. IPLF is audited yearly and their audited financial statements may be found at: http://www.archbalt.org/wp-content/uploads/2020/01/2019-18-Inter-Parish-Loan-Fund-.FS.pdf.

Let me thank you once again for your letter. I hope the information provided in the letter is helpful. If you have further questions, I would encourage you to contact directly Mr. John Matera, Chief Financial Officer . . .

Asking God's abundant blessings upon you and your loved ones and requesting a remembrance in your prayers, I remain

Faithfully in Christ,

Most Reverend William E. Lori

Donations can be sent to Max Obuszewski, Baltimore Nonviolence Center, 431 Notre Dame Lane, Apt. 206, Baltimore, MD 21212.  Ph: 410-323-1607; Email: mobuszewski2001 [at] comcast.net. Go to http://baltimorenonviolencecenter.blogspot.com/

"The master class has always declared the wars; the subject class has always fought the battles. The master class has had all to gain and nothing to lose, while the subject class has had nothing to gain and everything to lose--especially their lives." Eugene Victor Debs


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