Dignity, SSM expect investing strategies to have positive ecological, financial impact

November 15, 2016


Dignity Health and SSM Health are the first Catholic health systems to announce they've divested the vast majority of their holdings in the coal industry. Both say they are investing in green energy companies.

In the Midwest, a train transports coal. A growing number of organizations worldwide are divesting investments in coal companies.
© Brad Sauter

Representatives of both systems said the approach is grounded in their mission and values; it is the right thing to do for public health; and it also makes sense from a financial perspective.

"We looked at the coal industry's position and at scientific evaluations, and we reached the conclusion that 'clean coal' is pretty much an oxymoron," said Sr. Susan Vickers, RSM, vice president of corporate responsibility for San Francisco-based Dignity Health. "We chose to add an investment screen on coal because it is the largest contributor to greenhouse gases hurting our environment and biggest risk to public health."

Sr. Vickers

Lisa Zuckerman, Dignity Health senior vice president of treasury and strategic investments, said in the long term this type of socially responsible investing strategy has not hurt returns, and "we believe it can actually improve a portfolio's performance. As more companies move to curb greenhouse gases and recognize the negative contributions that coal has had to carbon emissions … there is a risk associated with investment in this sector, both financially and ethically."

Kris Zimmer, senior vice president of finance for St. Louis-based SSM Health, said that system came to a similar conclusion: "We believe that coal divestment, along with direct investments in sustainable companies, will enhance the portfolio's value over the long term." Zimmer said SSM has been divesting coal investments "over a period of time," and full divestiture was completed in March.


Worldwide movement
While Dignity Health and SSM Health are the first ministry systems to announce divestiture of coal holdings, they are part of a growing, worldwide movement. The Global Catholic Climate Movement, a network of hundreds of Catholic groups organizing to fight climate change, said more than 530 organizations worldwide, representing more than $3.4 trillion in funds under management, have committed to divest of coal holdings and other fossil fuel holdings such as oil and gas. Many of the companies' divestment commitments include a promise to invest in alternative energy sources.

According to the Global Catholic Climate Movement, the organizations are divesting in large part because "there is a strong scientific consensus that climate change is caused by human action and will very likely have catastrophic consequences if not tackled urgently," and coal is a significant culprit. The U.S. Energy Information Administration says surface coal mining can damage and pollute the land; underground mines vent harmful methane gas; and coal combustion for energy generation produces toxic emissions. The emissions contribute to smog, haze and acid rain and can cause or worsen respiratory illnesses and lung disease, the administration says.


The U.S. marketplace appears to be turning against the coal industry. A July 2014 Fortune article said numerous coal plants have been shutting down or slowing production and will continue to do so "because of tighter pollution regulations, slow growth in power use, and competition from natural gas." An April Reuters article noted that six major U.S. coal producers had filed for bankruptcy within the prior year. Those companies were Peabody Energy, Arch Coal, Alpha Natural Resources, Walter Energy, Patriot Coal, and Xinergy. The article said Xinergy had emerged from bankruptcy in February.

An April 2016 Wall Street Journal article said those companies had lost a combined $30 billion in stock market value since 2010.

Leading voice
Dignity Health's Zuckerman said the 39-hospital system always has applied socially responsible investing principles to its long-term investment portfolio, but it strengthened that approach about five years ago, adding more investment managers who proactively seek investments aligned with Dignity Health values, said Alyssa Rieder, the system's chief investment officer.

Dignity Health added thermal coal to its restricted list of investments and divested of coal stocks in its discretionary accounts last fall, Rieder added. Information was not available as Catholic Health World went to press on how far along the system is in the divestment process.

A wind farm in West Texas.
© mj007

Dignity Health declined to say how much of its $9 billion portfolio was impacted by the divestment. Currently, coal is the only fossil fuel screened out of Dignity Health's portfolio.

Zuckerman said in researching the decision to divest, Dignity Health found that few health systems had made such a commitment. She said Dignity Health expects its divestment strategy and its investment in alternative energy to build momentum for change. "We … believe that the heightened level of dialogue around this issue benefits the overall investment community and that together we can continue to be a leading voice around sustainability and socially responsible investing."

The 20-hospital SSM Health which operates in the Midwest, has a $3.5 billion investment portfolio. SSM declined to quantify its divestment in coal stocks.

Zimmer said the decision to divest was based on "the carbon footprint associated with coal, and the diminishing investment opportunities."

Zimmer noted that SSM currently does not directly invest in oil and gas projects, but it continues to maintain investments in oil and gas companies that are publicly traded. It may consider eliminating such fossil fuel investments from the SSM portfolio.

Zimmer said SSM's sponsoring organization, the Franciscan Sisters of Mary, had provided the "initial thought leadership" on the coal divestment, and it is in keeping with stewardship values in Catholic social teaching. He said the new approach is due in part to "our founding sisters' desire for our system to join them in their mission of compassionate care for creation."

Along with the divestment decision, SSM is implementing an impact investing strategy, through which it is making "direct investments in funds or companies that generate a measurable, beneficial social or environmental impact, along with a financial return," said Zimmer. SSM plans to allocate 5 percent of its private equity investments to such companies. Zimmer noted, "We made our first impact investment commitment this year to a fund that only invests in developing clean energy projects within the U.S." SSM declined to name the fund.


Systems say divestiture is part of larger effort to promote green energy

Representatives of San Francisco-based Dignity Health and St. Louis-based SSM Health said their divestments of coal stocks are part of broader efforts within their systems to promote green energy.

Sr. Susan Vickers, RSM, Dignity Health vice president of corporate responsibility, said that system is promoting a "lower carbon economy," including through shareholder advocacy and through green energy initiatives at its facilities.

Its shareholder advocacy includes direct engagements with companies. Sr. Vickers and other Dignity Health executives meet directly with top executives of energy and utility companies to urge them to adopt specific environmental practices. The Dignity Health executives sometimes are accompanied in the meetings by the leaders of environmental advocacy groups. Sr. Vickers has been part of a green contingent at meetings with Exxon, Chevron and General Electric officials. She said, "We were a pressure point in the past, and we continue that type of engagement and dialogue today."

She said as Dignity Health urges others to become more environmentally responsible, "we hold that mirror to ourselves."

Dignity Health is working toward system-wide goals for reducing energy use. This includes increasing its use of renewable energy to 35 percent and reducing its greenhouse gas emissions by 40 percent by 2020. Sr. Vickers said that despite an increase in hospital floor space and an increase in energy use across the 39-hospital system since 2010, Dignity has reduced carbon emissions by 10 percent during that time. These reductions were achieved in part through the use of alternative energy.

At SSM Health, too, the divestments complemented both preexisting and new green efforts. According to a press release issued in the spring to announce the coal divestment, SSM Health "over the past several years" has reduced its energy consumption by putting in place more energy-efficient lighting and electrical systems. It also has maintained or decreased its air emissions in all of its hospitals over the last three years. And, it has been incorporating green design principles in the construction of all new facilities over the past several years, said the release.

SSM Health is part of the Healthier Hospitals Initiative, a consortium of health care systems committed to reducing energy use and waste. In connection with its membership in this initiative, the health system has promised to cut energy use by 3 percent, achieve a 25 percent recycling rate and reduce medical waste to less than 10 percent of total waste. Dignity Health also is part of the Healthier Hospitals Initiative.


Copyright © 2016 by the Catholic Health Association of the United States
For reprint permission, contact Betty Crosby or call (314) 253-3477.

Copyright © 2016 by the Catholic Health Association of the United States

For reprint permission, contact Betty Crosby or call (314) 253-3490.