THE Church Commissioners excluded, on ethical grounds, more than 800 companies from potential investment last year, including, they report, 38 companies connected with Russia.
The figures are set out in their latest stewardship report, An Ethical and Responsible Approach, published last week. It is prepared annually to meet the reporting obligations of the UK Financial Reporting Council’s Stewardship Code and the Principles for Responsible Investment.
The total endowment fund was valued at £10.4 billion at the end of 2023 — up from £10.3 billion at the end of 2022 (News, 2 June 2023). The report covers the first year of the 2023-25 triennium, in which the Commissioners have committed themselves to distributing £1.2 billion in support of the Church’s mission — an increase of about 30 per cent on the previous triennium (News, 7 June).
“We are doing so against a backdrop of significant global economic and geopolitical uncertainty, and an accelerating climate crisis,” the First Church Estates Commissioner, Alan Smith, writes in his foreword to the report.
In 2023, the Commissioners announced that they would disinvest from fossil-fuel companies because, after a decade of engagement, none had, at that time, aligned itself with the goals of the Paris Agreement (News, 23 June 2023).
The Commissioners excluded 844 companies from their direct investments in 2023 on ethical grounds, the report says — up from 435 the previous year. These included companies that failed to engage with them on issues related to climate change (248 companies), alcohol (124), gambling (116), defence (104), and tobacco (68).
The significant increase (94 per cent) is due in part to the Commissioners’ expanding the scope of their climate restrictions, the report says, and the addition of 113 companies excluded for “special reasons” — “criteria including failed engagement following a norms-breach controversy and being domiciled in Russia”. The Commissioners sold their investments in Russian companies, worth an estimated £20 million, in 2022.
Every quarter, the Commissioners screen their public-markets portfolio for breaches of international norms and human rights. “Where issues are identified, we aim to engage with the companies, either directly, via our managers, or via our third-party engagement provider,” the report says. “Where a satisfactory outcome is not going to be achieved via engagement, we will consider disinvestment.”
Most of the 489 direct engagements with 417 companies in 2023 were with companies based in North America (46.9 per cent) and Europe (37 per cent). The two main topics of engagement were environmental (51 per cent) and social (49 per cent). Of environmental engagement, 50 per cent related to climate change, 41.8 per cent to biodiversity, and five per cent to deforestation. Of social concerns, 54.2 per cent related to human rights, 42.6 per cent to mental health, 2.8 per cent to responsible technology, and 0.2 per cent to modern slavery.
The Commissioners cast 13,346 votes in 2023; 95 per cent were management resolutions, of which they voted against, or abstained from, 22.7 per cent.
Most of the Commissioners’ assets are in North America (40.1 per cent) and the UK (31.1 per cent). Most are in public equities (30.1 per cent), absolute returns (11.1 per cent), private equities (9.5 per cent), and defensive equities (six per cent).
Mr Smith writes: “The Church Commissioners, as an in-perpetuity faith-based endowment investor, must take the long view, allocating capital with an eye on intergenerational equity. So we must know our past to understand our present.”
In 2023, this included pledging £100 million to mitigate the long-term consequences of the transatlantic slave trade, with which the Commissioners had identified a link, reported that same year (News, 13 January 2023).
“That shameful truth — that we were involved in the profoundly immoral act of treating our fellow human beings as chattel, as property in pursuit of corporate returns on investment — made us reflect on how we, as an ethical and responsible investor, should act, looking ahead, to build a better future,” Mr Smith writes.
