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EIAG defends C of E’s Wonga holdings

04 July 2014

CHURCH OF ENGLAND

"Difficult choices": the chairman of the EIAG, James Featherby

"Difficult choices": the chairman of the EIAG, James Featherby

THE Church of England should retain its investment in the payday lender Wonga, in the hope of improving the company's moral standing, a review by the Church's Ethical Investment Advisory Group (EAIG) suggests.

The group's chairman, James Featherby, said: "In our view, it is better to stay on the field of play than to sit on the sidelines."

The annual report refers to the Archbishop of Canterbury's threat to "compete Wonga out of business", not knowing that the Church Commissioners' £6-billion investment portfolio included shares in the firm, thoughtto be worth between £75,000 and £100,000 (News, 26 July).

The review findings caused consternation in some quarters, where it was felt that the Church should not be involved with an organisation which last week had to apologise and pay out £2.6 million compensation for sending out bogus legal letters to 45,000 debtors. The City of London Police are still considering whether to launch a criminal investigation.

The Vicar of St Matthew's, Elburton, in Plymouth, Prebendary Rod Thomas, who chairs the Evangelical group Reform, told the Daily Mail: "I do not think the Church Commissioners have set out to do anything other than act in the best interests of the Church, but once the facts are presented to them, it is up to the Commissioners to do something about it."

The chief executive of Christian Concern, Andrea Minichiello Williams, said: "The job of the Church is to tell the truth, and it should not be doing things that do a disservice to that task."

The review pointed out that the Wonga holding was part of a "pooled fund" directed by a third party, which meant that other investments would have to be sold if Wonga was dropped. That could cost the Commissioners anything between £3 million and £9 million.

The National Institutions, said Edward Mason, the EIAG Secretary, "have no direct investments in high-cost lenders. Investment restrictions in this area were first proposed by the EIAG in 2001 when the EIAG advised against investing in doorstep lenders."

He pointed out that, as early as 2011, the EIAG had advised the national church institutions to avoid payday lenders and all other forms of high-cost credit. "This policy was so far ahead of what any other ethical investors were doing that the research company the EIAG used to identify companies breaching the Church's ethical investment policies had never been asked to identify high-cost lending companies for investment exclusion before."  

Mr Featherby hinted that the Church would not retain the investment in the long term, and said that it would be treated according to the parable of the weeds in St Matthew's Gospel, which were allowed to grow with the wheat until harvest, and then separated out and burned.

He said that the controversy had "highlighted some misconceptions about ethical investment, and, in particular, that its objective is to achieve a morally perfect portfolio.

"It is no more realistic to desire that they invest only in morally perfect companies than it is to desire that any of us should relate only to morally perfect individuals. In any event, such an objective would rather miss the point of the gospel. It is not the healthy who need a doctor, but the sick. . .                                            

"When engaging with companies, the investing bodies seek positive momentum, not perfection. We usually only recommend divestment where we see no genuine desire for change."

He concluded: "Difficult choices remain, and it is inevitable that the investing bodies will, from time to time, graze their knees as they interact with a complex and ambiguous business world."

The review also decided to reduce its ethical-investment thresholds, shunning businesses with more than ten per cent of their business in tobacco, gambling, high-interest-rate lending, or human embryonic cloning, instead of the present 25 per cent.

The Association of British Credit Unions, which had previously welcomed Archbishop Welby's stand on Wonga, declined to comment on the review.

A spokesman said that it did not have "enough of an understanding of the C of E's investment policies and their practicalities to make an informed comment".

Welby warns of rising menace of loan sharks

THE poor are in danger of being forced into the hands of loan sharks because of the decline of payday lenders, the Archbishop of Canterbury has warned, writes Tim Wyatt.

Speaking to the New City Agenda think tank in the House of Lords on 17 June, Archbishop Welby said that the payday lending market was declining, but credit unions were not yet well established as a source of low-cost loans.

"Of course I am concerned . . . that if you knock payday lenders on the head before there is a viable alternative, in many parts of the country the only place people can go is loan sharks," he said.

While payday lenders charged "usurious" rates of interest, theydid not "send people round with baseball bats", Archbishop Welby said.

Ever since he pledged to compete the payday lender Wonga out of business last year, Archbishop Welby has been championing credit unions as an alternative. He admitted, however, that it could be a decade before they were a viable option for many.

Archbishop Welby, who was a member of the Banking Standards Commission, told the audience that the culture of banking had become "contaminated" by the time of the financial crisis in 2007.

Even though he was convinced of the desire to change by many chief executives, he said that reinventing the culture of banking would take a very long time, and was not something that could simply be changed by making new laws.

Instead, he urged the financial industry to adopt values-based banking - not just seeking the best interests of those in the system, but the "common good" of the whole nation, even those not contributing to the economy. Quoting Pope Francis, he told the audience: "Money must serve, not rule."

His remarks came shortly before a report by the City regulator, the Financial Conduct Authority (FCA), revealed that Wonga had threatened some customers with letters from fake law firms.

Some people who were in arrears on their loans were sent letters threatening legal action from law firms called Chainey, D'Amato & Shannon, and Barker and Lowe Legal Recoveries. Neither firm actually exists.

The FCA has told Wonga to spend £2.5 million compensating up to 45,000 customers who were affected by the practice.

 

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