ESG and the sexual abuse of the Catholic Church – 09/03/2023 – Rodrigo Tavares

Bartolomeu da Silva Paz, José Carlos Pereira, Pedro Leandro Ricardo or Tarcísio Tadeu Sprícigo are priests denounced or convicted in Brazil for harassment or rape of minors. The press has already revealed dozens of cases. The country is not immune to the shockwave caused by the sadistic brutality of the men in cassocks.

Portugal is the most recent example. In the past seven decades, nearly 5,000 children have been sexually abused by Catholic priests. It is a “minimum number, absolutely minimal”, said last month the coordinator of the independent commission that carried out the investigation. Only 25 complaints were sent to the Public Prosecutor’s Office, due to the statute of limitations of the majority or the anonymity of the testimonies.

The Portuguese church’s response this week revealed an immense lack of compassion. Abusing priests will not be immediately investigated or removed. The church will not compensate the victims. The law was dubious when the abuses were committed, said the president of the Portuguese Episcopal Conference, while carrying an equally dubious cross on his chest.

In 2019, a British NGO presented a comprehensive report, with cases reported in the 18 Spanish-speaking countries of Latin America and also in Brazil, in which it pointed out that “no important investigation was found [pública] on child sexual abuse within the Catholic Church in Brazil and efforts to account for clergy abuse are scant.” In 2005, a secret Vatican investigation, cited by The Guardian and IstoÉ, revealed that approximately 1,700 Brazilian priests were involved in cases of sexual misconduct, including the physical abuse of children and women.

In addition to Portugal, over the last two decades, independent or parliamentary commissions have already been installed in Ireland, Australia, Germany, France, USA, Chile and Spain. In all these countries the church systematically covered up abusers or downplayed victims’ grievances. Brazil needs to do a similar investigation.

It is outside the scope of this article to assess why the Catholic Church has become the institution that most welcomes and retains sexual predators. And why, despite the appeals of Pope Francis (since 2013), he maintains a posture of connivance with these heinous crimes.

However, in almost all Western countries with a Catholic majority, the church is an element of cultural unity and institutionalization of the collective. Its influence goes beyond the limits of the doctrine of faith. The Society of Jesus founded the largest Brazilian city and created the foundations of public education in the country. Carnival is originally a biblical celebration. Christian ethics still influence law and legal hermeneutics in Brazil.

This is where the abuses of the Catholic Church connect with ESG. Human rights violations and sexual violence are ESG indicators that some investors consider when assessing an asset’s risk profile. This asset can be a company or a country. Sovereign risk ratings –commonly referred to as credit ratings– determine the level of interest a country must pay on loans and credits. And it is increasingly common for risk agencies to account for ESG aspects in addition to financial ones when stipulating a country’s risk profile.

The logic also applies to companies. There are countless companies that lost market value due to internal cases of sexual harassment, such as Mitsubishi, Walmart, Alphabet or Amazon. Knowing the potential for value destruction that these cases have –including long-term financial risks, operational disruptions and reputational damage–, the US regulator SEC began, in 2022, to pay attention to diversity and culture in the workplace of companies listed.

One study has shown that companies with the highest rates of sexual harassment incidents experience a 17% drop in stock value in the first 12 months after the incident is disclosed and an increase in labor costs over the next five years. If the Catholic Church were a company, its market value would be robbed by the systematic cases of child cruelty.

Returning to country risk, Moody’s, S&P and Fitch already integrate ESG risks, including those related to human rights, into their sovereign risk assessment methodologies. Several ESG rating agencies, such as Robeco, SolAbility or Sustainalytics, also take into account the ability of a country to manage its natural, human and institutional assets well, because these criteria affect the prosperity of national economies.

The sexual abuses of the Catholic Church, which directly affect tens of thousands of victims and indirectly millions of people, represent a systematic violation of a human right committed by an institution that exerts a dominating influence in many countries. Abuse is therefore a sovereign ESG risk; they are directly linked to human rights issues, social unrest, institutional breakdowns or corruption.

A country is not a company. The logics are necessarily different. But people who have been sexually abused by the Catholic Church or women who are harassed in the workplace are both victims. The institutions of law and the financial market are also different. But both, for different reasons, should pay attention to the victims of sexual predators.

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