THE Church Commissioners announced on Friday that they have successfully extracted themselves from their financial stake in Wonga, the payday lenders criticised last July by the Archbishop of Canterbury.

His criticism of Wonga for charging vulnerable people high rates of interest (26 July 2013) was undermined by the revelation that the C of E had a financial stake in the company, albeit an indirect one through a venture-capital portfolio holding.

The nature of a portfolio investment is that it is viritually impossible to alter the terms during the period of one's investment. In Friday's announcement, the Church Commissioners stated: "The Church Commissioners estimate that, if they had had to sell their entire venture capital holdings, they might have lost £3-9 million to remove the exposure to Wonga, which was worth less than £100,000."

The announcement went on: "The Commissioners are pleased that another way forward has been agreed, given their fiduciary duties to clergy pensioners and to all the parts of the Church they support financially." It also makes it clear that the Commissioners have ensured that they have made no profit from their indirect holding in Wonga. The nature of the deal, remains confidential, but it is said to be unusual.

In its recent annual report, the Ethical Investment Advisory Group explained: Pooled funds are often the only way to access certain asset classes and investment strategies - including venture capital, which can not only increase financial returns for investors but also serve society." The Wonga exposure had arisen in a pooled fund, "which could not be screened in the way that direct holdings are screened". 

It is believed that, by declining to take any profit from their Wonga holding the Commissioners have signed away a five-figure profit.

Edward Mason, newly appointed Head of Responsible Investment at the Church Commissioners, said on Friday that having an ethical approach to investments came at a potential cost. "It is calculated that, in recent years, the ethical investment policy has cost the Commissioners about 0.2 per cent in lost profits annually. This might not seem much, but, given the size of the Church's investments, we forgo several million pounds a year by having such strict exclusions about what we will invest in.

"It's a balancing act, given our responsibility to fund clergy pensions and other church activities, and we monitor it very closely, but it is the right thing to do."

When the Wonga holding was revealed last July, Archbishop Welby admitted that he was "embarrassed" and "irritated" by the news. The Archbishop has no direct control over the Church's investments - the responsibility of the Commissioners' assets committee - but it is known that he has been putting pressure on them in recent months.

In an interview for the BBC's Andrew Marr Show, to be broadcast on Sunday, he said: "I have been absolutely clear that I do not believe that the rates of interest charged by these companies are ethical and moral - they are legal but they are not ethical or moral.

"I can obviously apply pressure, encouragement, and I've tried to do that. I'm absolutely delighted that we are now out of Wonga and have taken no profit from it."
 

Correction: in our story about the EIAG annual report (4 July), we stated that the EIAG was defending the holding in Wonga. We accept that this was a misrepresentation of the report's general defence to the EIAG's approach to ethical investment. Direct investments can be used to improve the ethical practices of the companies invested in. This is not the case with indirect investments through pooled funds. We apologise for the error.