| Investing demands doing well, doing good By Erik AlsgaardUMConnection staff If a local church takes a bequest from a member earmarked for the pipe organ and after 15 years decides to use it for a new building, most people would say this was unethical. But is it also illegal? Its illegal, and under IRS statutes, the church can lose its tax exemption for doing this, said the Rev. Terry Leckrone, executive director of the United Methodist Foundation of the Baltimore-Washington Conference. Churches are also in the investment business. Local churches are fiduciaries, said Leckrone. That means they are charged with the investment and management of somebody elses funds. As fiduciaries, local churches are governed by certain laws, Leckrone said. In the last decade, a new law has been developed, titled the Uniform Prudent Investment Act. UPIA has been adopted in 34 states, including West Virginia, and the District of Columbia. Maryland has similar state laws already on the books. The old standard, called the Prudent Man Standard, went back to the 1830s. It was pretty easy to meet, Leckrone said. You asked, What would a reasonable person do? The new standard UPIA now asks, what would a reasonable investment person do? And therein lies the rub for United Methodist Churches: can they do well with their investments and still be Christian? Can they invest in the stock market and bear witness to their Christian faith at the same time? And if they dont do well in their investments, can churches get into trouble? Leckrone answered yes to all three questions. In The United Methodist Church, we have an obligation to responsibly invest and to witness to our Christian faith. The General Council on Finance and Administration does not feel that there needs to be a conflict. Traditionally, Leckrone notes, the Evangelical United Brethren Church and The United Methodist Church have stood firmly against tobacco, alcohol and gambling. As a result, the General Board of Pensions and Health Benefits, which has investments of $10 billion, has developed a list of ineligible companies that have failed one or more of their screening criteria. (See sidebar.) They say theres no such thing as a pure investment, Leckrone said, and theres not, not in this day of multinational corporations. His advice: Have the investment or endowment committee sit down with the pastor and look at the religious obligation they already have and make sure the social principles of the local church are going to be honored. One of the approaches Leckrone suggests is for investors to look at companies and ask if less than 10 percent of its revenue derives from objectionable activities. It seems to me that there is a fine line between raising a testimony and not making sense, said Leckrone. To me, I would not own Wal-Mart stock. I am far more offended by Wal-Marts track record of ruining small-town American, locally-owned businesses, than I am that Outback Steakhouse serves alcohol. However, a member of a local church could bring a lawsuit against the trustees or the investment committee if they felt the church was not acting as a reasonable investor, under the UPIA standards. Under this new law, the basic principle is that you must diversify, Leckrone said. You have to have a written investment policy, stipulate your goals, how youre going to reach those goals and how various types of investments are going to fit in to achieving those goals. The Baltimore-Washington Conference Foundation is unique in the country, Leckrone noted, because it is a registered investment advisor, just like Legg Mason or T. Rowe Price. As a result, he said, there are several levels of accountability built into the system. The Foundation can help local churches balance on the tight rope of socially responsible investing. Legally, our first responsibility is fiduciary. Our task, then, becomes how do we help the church to honor its commitment to improving the world while exercising that responsibility. | 
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