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Church of England national investment bodies strengthen ethical engagement with companies

Posted on: March 5, 2019 3:23 PM
The London Stock Exchange (to the rear and right) behind St Paul's Chapter House, photographed from the roof of London’s St Paul’s Cathedral.
Photo Credit: Gren / Wikimedia

The national investment bodies of the Church of England have announced a series of success stories with its stakeholder engagement. The Church Commissioners, the Church of England Pensions Board and the Central Board of Finance Church of England Funds are independent bodies which, between them, control investment assets of some £13 billion GBP. They are increasingly working with other investors to push for company boards to adopt ethical standards.

Last month, the global mining company BHP announced it was supporting calls for a global independent public classification system for tailings dams. The call was made by a C of E-led coalition of investors with £3 trillion under investment, after the Vale dam in Brumadinho, Brazil, collapsed with the loss of around 300 lives. The Bishop of Birmingham, David Urquhart, will chair a high level meeting of investors, leading global experts and senior industry representatives this week to advance the investors’ call.

A few days after the BHP announcement, another mining company, Glencore, said that it would align its business and investments with the goals of the Paris Climate Change Agreement. The agreement, reached at the UN’s COP21 meeting, seeks to limit global warming to below two degrees Celsius and to achieve net zero emissions in the second half of the century. In its announcement, Glencore undertool not to grow its coal production capacity.

The announcement followed engagement by the Climate Action 100+ coalition of institutional investors, which have combined assets in excess of $32 trillion USD (approximately £24.4 trillion GBP) under investment.

The Church Commissioners’ Head of Responsible Investment, Edward Mason, is the lead negotiator for the Climate Action 100+ coalition. “Delivering on the goals of the Paris Agreement requires unprecedented collaboration and today’s announcement is a positive step forward for Glencore, its investors and the fight against climate change”, he said. “Investors will now want to hold the company to its commitments and to ensure that the methodology for determining the company’s alignment with the Paris goals is robust.”

A few days later, with the coalition on tailings dam safety having grown to investors with £5 trillion GBP of assets, the International Council on Mining and Metals (ICMM), a global trade body representing 27 multinational mining companies, announced that the Chief Executives of its member companies would establish an independent panel of experts to develop an international standard for tailings facilities. The standards will include a global and transparent consequence-based tailings facility classification system with appropriate requirements for each level of classification; a system for credible, independent reviews of tailings facilities; and requirements for emergency planning and preparedness.

The Director of Ethics and Engagement for the Church of England Pensions Board, Adam Matthews, co-leads the investors’ tailings dam safety initiative. He gave a cautious welcome to the announcement, describing it as “a welcome step in the right direction”.

The Church of England’s national investing bodies also work collaboratively with other Christian groups through the Church Investors Group, a coalition of church organisations with combined investment assets of approximately £21 billion GBP. It includes the main investing bodies of the Church of England and the Methodist Church in Great Britain; as well as 67 other bodies, including the Church Mission Society, the New Zealand Anglican Church Pension Board, the Representative Bodies of the Church of Ireland and Church in Wales, the Scottish Episcopal Church, USPG, Songs and Friends of the Clergy, and Christian Aid.

The group has written to companies in the FTSE (Financial Times Stock Exchange) 350 listing to advise them of a new tough approach to voting in this year’s AGMs where “reform on key issues is deemed to be too slow”, the Church of England said.

The Church investors’ “common voting template” will see them vote against the Chairs of companies which score zero for tax transparency in the FTSE ESG ratings. They will also vote against Chairs of companies rated Level 0 or 1 by the Transition Pathway Initiative (TPI) on climate change; and also against the Chairs of electricity utilities “which do not have emissions reduction pathways consistent at least with the Nationally Determined Contributions submitted by parties to the Paris Agreement, or whose disclosure is inadequate in order to make such an assessment.”

They will also vote against the Chair of the Nominations Committee of companies in the main indexes in Europe, the US, Australia and New Zealand if they do not have at least one female director; and also vote agaist remuneration reports of FTSE 350 companies that do not disclose the pay ratio between the CEO and average employee.

“Ultimately, a company’s license to operate depends on the confidence of the public and its long-term contribution to the common good”, Canon Edward Carter, Chair of the Church Investors Group, said.

“Our voting template for 2019 sends a strong signal to companies about the issues where we want to see change”, he added. “Climate change, diversity, remuneration and corporate tax are areas that concern not only fairness but also the mitigation of risk to the companies themselves and wider society.

“As asset owners, we will continue to press with our votes the need for companies to act responsibly and work not only for the benefit of shareholders but also contribute to the wider common good in both the short and long term.”