Reflecting on U.S. Wildfires, Climate Action and Sustainable Investing

   By Dave Zellner
   Chief Investment Officer
 
   September 17, 2020

As some of you may know, I frequently travel to and from Seattle, where my children and grandchildren live.

In fact, I just returned from the area after a planned two-week visit we cut short due to smoke from forest fires in California and Oregon. The smoke from these nearby fires enveloped the city this past weekend, though conditions have been similar since Labor Day as the city felt the earlier effects of large wildfires in Eastern Washington.

In the final few days of our visit to Seattle last week, my life partner and I spent all our time in our small condo—the windows tightly shut. We have no air conditioning, and temperatures were elevated. Spending any time outdoors would certainly be hazardous to one’s health, and any circulation of outside air could be dangerous. This was another unique experience to add to the recent list of firsts.

2020 is a year like no other. We have seen a global pandemic, social justice protests and unrest, a busy Atlantic storm season, and now devastating and heartbreaking wildfires. The below picture, shared with me by one of Wespath’s senior leaders, is humorous but also quite appropriate.

Levity aside, we cannot ignore the facts. Record heat, dry conditions and, in some cases, reckless human activity caused the wildfires currently blazing across the Western states. We are also witnessing these fires figuratively stoke debates about climate change and humanity’s impact on the environment. Likewise, conversations about major social inequities continue to intensify.

I snapped this next picture on our way to the Seattle airport.

The appearance of the word “Breathe” on the barrier is completely happenstance, but I cannot help but think of its many layers of meaning. People on the West Coast are quite literally having difficulty breathing amid this environmental disaster, and we continue to battle a novel virus that attacks the lungs. More metaphorically, people around the world are feeling suffocated by the pressure of inequalities laid bare by COVID-19 and racial injustice.

This reflection, and my entire experience in Seattle, got me thinking further about our current circumstances, the work we do at Wespath, and our commitment to the financial well-being of our participants and investors.

I am lucky that I have the means to “escape.” Most Americans do not have that option available, forcing them to suffer the unhealthy effects of uncontrolled fires. Additional suffering during already challenging times is not something that we can take lightly.

As I have written before, Wespath believes that we must seek to create and support our vision for a sustainable global economy to meet the return expectations of our participants and institutional investors. We define a sustainable economy as one that achieves long-term prosperity for all, social cohesion and environmental health.

Naturally, conversations about the causes and effects of the ongoing wildfires get us thinking about that last pillar—environmental health. Our Low-Carbon Transition Investment Belief states that we think “public policies, emerging technologies and physical impacts associated with concerns about climate change are creating winners and losers across companies, industries and countries, impacting investment returns.” It is entirely possible that the response to the current fires will provide direct support for this belief.

Many events that have taken place this year have also forced us to think critically and strategically about the two other pillars of our Sustainable Economy Framework.

For instance, concerns about social cohesion caused our team to participate in important discussions regarding the priorities of our engagement efforts. The team raised key questions, including whether we should pivot from climate risk engagements to direct greater resources toward promoting equality and social justice.

We all emphatically agree that social justice and inequality are systemic issues that society must address through collective action and bold, creative ideas. We have committed new resources to addressing these issues and supporting these ideas. It is a key priority for us moving forward.

But we also recognize that each of the pillars of a sustainable economy are closely intertwined. Witnessing firsthand the possible effects of unmitigated climate change is a stark reminder of the scale of the climate threat we are facing. Hence, we cannot deemphasize the urgent need to aggressively pursue mitigating that which threatens the well-being of humanity. Adverse weather events will continue to worsen. We may see even busier storm seasons and even heavier wildfires. Those of us fortunate enough to avoid the worst of the consequences might be fine for now, but the underprivileged—in America and around the world—will be those most adversely affected.

The risks and opportunities related to climate change represent significant investment-related issues that we cannot ignore and that must remain Wespath’s number one engagement priority. We must act now to hasten the transition to a low-carbon economy—or else future generations may face a fate far worse than what we confront today.

Now, I understand that such a strong stance may seem polarizing. Make no mistake: we are committed, first and foremost, to the financial well-being of our stakeholders. Our very first Investment Belief is Investor Focus. Everything we do must align with the investment goals of our participants, beneficiaries and United Methodist-related institutions we serve.

Accordingly, all that we do to promote a sustainable global economy—including our approach to climate change and the low-carbon transition—we do with our first Investment Belief in mind. Rest assured we firmly believe the actions we take are imperative for fulfilling our fiduciary mandate.