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SYNOD: Engage with and change companies, says adviser group

21 February 2014

Ethical investments



"Positive view of business": James Featherby

"Positive view of business": James Featherby

THE new chairman of the Ethical Investment Advisory Group (EIAG), James Featherby, made himself available for questions from Synod members after a presentation about the work of the group from Mr Featherby and the EIAG's vice-chairman, the Revd Professor Richard Burridge (University of London).

Professor Burridge began by explaining that the EIAG came into being after one of his predecessors as Dean of King's College, London, the Rt Revd Richard Harries, took the Church Commissioners to court over South Africa. "Things have moved on, now that the Dean of King's is a representative of the Church Commissioners," he said.

The EIAG's task is to advise the C of E's national investing bodies (NIBs): the Church Commissioners, the Pensions Board, and the CBF (C of E funds managed by CCLA). The three have combined assets of about £9 billion.

"Our starting point is that we take a positive view of business and of the role of business in society," Mr Featherby said. It was "entirely appropriate" that the Church should provide capital to support business, and the investments increase the ability of the Church to "fund mission and support witness".

The EIAG was "not naïve about the problems". It was right for the Church to avoid some investments. The Church's restricted list excluded about 12 per cent of the FTSE 350 index of companies; but, he said: "Our investments are never going to be pure: investment, like life, is always going to be ambiguous."

Engagement with companies was better than disengagement. "We are going to graze our knees, [but] we need to be involved on the field of play, not sitting on the sidelines."

The part played by Christian investors was not to be "some sort of moral policeman", but to encourage business to be "all that it can be in God's Kingdom".

The EIAG's engagement with business "tends to focus on what are called EESGs: ethical, environmental, social, and governance issues", Mr Featherby said. "This means things like sustainable environmental practices, respect for human rights, fair treatment of employees, customers, and suppliers, proper systems of corporate governance; and also, from time to time, we engage with wider public-policy initiatives."

The EIAG used its voting powers actively. In 2013, it had voted on 30,000 resolutions at 2820 company meetings, and supported only 30 per cent of UK executive remuneration pay reports. It had also engaged directly with 42 companies.

"We find that we are reinforcing elements of good practice, or aspirations to good practice, that are already under way," Mr Featherby said. EIAG would, as a last resort, recommend divestment where there was no evidence of a momentum for change, as it had with the mining company Vedanta.

Professor Burridge explained that the EIAG applied a "Christian systematic theology" to its investment advice, including identifying the biblical approach to issues such as warfare or alcohol.

"Many supermarkets told us that we were the first people to want to talk to them about the dangers of alcohol. We've been working very closely with advisers from the NHS, from the police, from social services, and so on; and are working towards making recommendations to the NIBs later this year.

"But, already, as a direct result of our engagement, three major UK supermarkets - Tesco, Sainsbury's, and Morrisons - have published new alcohol-policy statements in which they have recognised the harm that alcohol can do. And action has been taken by them, particularly on things like high-strength white cider."

Mr Featherby spoke of the "pooled-funds" type of investment, and the risks inherent in "losing an element of control" when your funds were put alongside those of others.

The decision whether or when to sell the stake in Wonga was "not one for EIAG", but for the Church Commissioners. "I understand from them that it may be a little while before they are able to dispose of that investment," he said. "To dispose early might damage other investments, because Wonga is held in a pooled fund alongside other much more positive investments, and one simply can't sell one without the other."

Before questions from the floor of the Synod, the Chairman of the Church of England Pensions Board, Dr Jonathan Spencer, said that the board "values greatly the work that the EIAG does". He warned that the Church "should be active in a hard-headed way without . . . being seduced by the view that investment solves all our problems".

Responding to a question from Tim Allen (St Edmundsbury & Ipswich), Mr Featherby explained that the Commissioners' investment in Wonga was known about "at a fairly junior level", but there was a "communications failure" between the Commissioners and Lambeth Palace. A review was currently under way, but, he said, "Can we guarantee that this won't happen again? No, we can't."

He told Gavin Oldham (Oxford) that it was "difficult to tell" whether damage was caused to the Church's investment portfolio by excluding particular stocks. He reiterated that it was important to be engaged with businesses. An academic report said that "companies improved because of our involvement."

April Alexander (Southwark) asked whether it was taken into account which companies paid their employees the Living Wage. Professor Burridge explained that was a difficult area because "all public organisations have to go out to public tender and are required to take the lowest bid."

All staff directly employed by the Church Commissioners were paid the Living Wage, and it was being written into agreements with sub-contractors that their staff employed on C of E contracts must be paid the Living Wage from 2015.

The Archbishop of York, Dr Sentamu, said that this was not good enough. "York City Council has announced that, as from April, all sub-contractors will be paid the living wage. If a city council can do it, why can't we? You must try to persuade them."

Professor Burridge replied that he "enjoyed being pushed by the Archbishop of York". As a member of the board of the Church Commissioners, the Archbishop could "push a little harder than I could".

Responding to a question from Dr Anna Thomas-Betts (Oxford) whether the EIAG could widen its engagement on issues such as climate change with other parties, such as the Government, Professor Burridge said that it was "right that we have to engage elsewhere, particularly with the Government"; but, he said, "that's why we have bishops in the House of Lords and Mission and Public Affairs. We're tied up with ethical investments."

In response to a question from the Revd Hugh Lee (Oxford), Professor Burridge said that the EIAG had been "in conversation with a number of companies" about carbon-capture and storage facilities, and with oil companies regarding exploration in the Arctic.

The Bishop of Warrington, the Rt Revd Richard Finn (Liverpool), asked whether disinvestment closed the door on engagement: "Is reinvestment possible?"

Professor Burridge highlighted the difference between the approach of Vedanta and News International. With Vedanta, the EIAG sent a representative to India to investigate its concerns, "but a single shareholder with a majority share that wasn't going to change the policies. . . So we did recommend to the NIB that they should dispose of their investments. . . Many others who were also concerned also disinvested, following our lead. . .

"What we have found with Vedanta is that suddenly they are banging on our door, and asking us to come back and reinvest; and asking what they would have to do to get us to reinvest; so now we are re-engaging again. . .

"But, in the case of News Corporation, Rupert Murdoch was somewhat rude about the Church Commissioners, and has not come banging on our doors to have us back. I would love to think that Rupert Murdoch lies awake at night quaking in his boots at the thought of the Ethical Investment Advisory Group, but I fear that he is not."

Penny Allen (Lichfield) said: "it seems ironic that at the one end we have investments in alcohol, and at the other we're mopping it up through street pastors."

Professor Burridge said that the EIAG had "come up with a very long list of standards": "unless a company passes a test on each of those, they won't be open for investment."

Jackie Butcher (Sheffield) asked what effect the EIAG's engagement with Nestlé had produced: while the company was compliant in some areas, it still "perpetuated malpractice" elsewhere.

Mr Featherby replied that the EIAG did "meet with Nestlé quite regularly to discuss these issues"; he would be happy to hear about "areas where Nestlé are not doing all that they could".

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