Commissioners shift investments to protect assets

20 May 2016

iSTOCK

Wheels within wheels: a bicycle park at Google's Googleplex corporate headquarters, in Mountain View, California

Wheels within wheels: a bicycle park at Google's Googleplex corporate headquarters, in Mountain View, California

THE Church Commissioners have sold hundreds of millions of pounds in shares to protect themselves from instability in global stock markets.

The Commissioners’ £7-billion investment fund defied fears of a slowdown by producing a total return of 8.2 per cent in 2015, com­fortably outpacing both its own targets and industry bench­marks.

But the First Church Estates Com­missioner, Sir Andreas Whit­tam Smith, has revealed in his fore­word to the Commissioners’ 2015 report that, in response to falling stock markets around the world, shares worth £250 million have been sold, and exposure to property assets has been cut by £102 million.

”No sooner had the Commis­sion­ers completed a satisfactory 2015, with a total return of 8.2 per cent, than global stock markets staged a dramatic setback,” Sir Andreas wrote. “The message for investors is to tread carefully. We have been increasing our investment in areas that are not subject to every twist and turn in stock market prices.”

The Commissioners’ success was especially marked when compared with the one-per-cent return “eked out” by the London stock market, Sir Andreas wrote. But jittery mar­kets around the world meant that these kind of returns could not continue for ever.

”My message to the wider Church is: don’t count on it. The risk is that economic activity slows down across the world and remains stuck at a low level.”

Although the Commissioners’ fund continues to perform strongly, the annual report has prompted criticism, as it showed that Google’s parent company, Alphabet, is among the 20 most-valuable hold­ings in the fund.

The Liberal Democrat MP John Pugh told The Times that it was “particularly embarrassing” for the Church to have investments in a company that had sought to avoid paying tax in the UK. Mr Pugh spoke of “the strong assurances given to me in the Commons that the Church of England is drilling down hard on tax avoidance, and any investments it may have in companies that seek to avoid tax. On the face of it, this seems inconsistent with that policy.”

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A spokesman for the Commis­sion­ers said that, while they had not currently spoken to Google about its tax affairs, they intended to initiate a conversation with the firm soon. Google agreed to pay £130 million to HMRC in February, to cover tax payments back to 2005, after crit­icism that it was moving all its UK profits to Ireland to avoid paying tax.

The most recent ethical investment guidelines from the Commissioners on tax avoidance, which date from 2013, state that “tax ethics should be a subject for investor engagement where it appears that a company’s approach is blatantly aggressive or abusive”.

Edward Mason, the head of responsible investment at the Com­missioners, said that he was proud of how his team had helped to force through share­holder resolutions on better climate-change policies at BP and Shell in 2015.

In the coming weeks, he will attend the AGMs of large mining companies and ExxonMobil, the largest publicly-traded oil company in the world, to argue for similar resolutions.

Among the Commissioners’ biggest share-holdings are other energy companies such as BP and Shell, the technology firms Microsoft and Samsung, the pharmaceutical giants AstraZeneca and GlaxoSmithKline, and banks, including HSBC, RBS, and Lloyds.

As a result of the strong perform­ance, the Commissioners gave £218.5 million to support the C of E in 2015. This amounted to £47.5 million in ministry and mission support, £122.7 million on pensions, £42.7 million covering the costs of bishops and cathedrals, £4.7 million on pastoral reorganisation and closed churches, and £900,000 running the national clergy payroll.

Andrew Brown, secretary to the Commissioners, said: “I want to congratulate the investment team for the continued strong performance, delivering more than eight per cent in a challenging financial climate. But we must not forget the generous support from parishes, dioceses and cathedrals which provide around three quarters of the Church’s annual spending on ministry and mission.”

Another product of the contin­uing success of the fund is the rising remuneration of its director of investments, Tom Joy, which increased to £463,000 in 2015, from £410,000 in 2014. Some £208,000 of this was a “long-term incentive payment” connected to investment performance.

This means Mr Joy’s total remuneration is almost six times that of Archbishop Welby’s, and almost 20 times that of a parish priest.

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