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Church Commissioners report strong 17-per-cent return on investments

26 May 2017


Having it "so good": senior Cabinet members listen to Harold Macmillan's speech to the Conservative Party Conference in Brighton, in October, 1957. Left-to-right: the Minister of Defence, Duncan Sandys; the Chancellor of the Exchequer, Peter Thorneycroft; the Foreign Secretary, Selwyn Lloyd

Having it "so good": senior Cabinet members listen to Harold Macmillan's speech to the Conservative Party Conference in Brighton, in October, 1957. Le...

THE Church Commissioners have “never had it so good” after they reported a 17-per-cent return in 2016, the outgoing First Church Estates Commissioner, Sir Andreas Whittam Smith, has said.

Writing in the Commissioners’ annual report, Sir Andreas, who retires next month, said that the performance of the nearly £8-billion fund had been “stellar”.

“Looking at the recent perform­ance of stock markets, and at the Church Commissioners’ perform­ance, I am reminded of the words of Harold Macmillan. . . ‘Let us be frank about it: most of our people have never had it so good.’”

The total value of the Commis­sioners’ investment fund grew by £900 million over 2016. The only times that greater returns have been generated were immediately after the Second World War and during the tech bubble of the 1990s, Sir Andreas said.

The Commissioners’ target is a return of inflation plus five per cent, which, in 2016, amounted to 7.5 per cent. This figure was eclipsed by the 17.1-per-cent return that the fund managed.

The secretary and chief executive of the Commissioners, Andrew Brown, said that last year had been among the best — if not the best — years for their investments for decades. “We have had some very strong investment returns,” he said. “We have seen some good returns coming through from active man­age­ment and the decisions made by my investment colleagues. It’s all come together.”

The Archbishop of Canterbury also praised the Commissioners’ efforts: “In a year which saw consid­erable political turbulence, the Church Commissioners continued to provide effective stewardship of investments matched by ethical and responsible investment.”

Besides being helped by well-performing stock mar­kets globally, the return benefited from the fall in value of the pound after the EU referendum last year.

Over the past decade — which includes the financial crisis of 2007 — the Commissioners’ average annual return was 8.3 per cent, beating its target of 7.8 per cent.

PA Challenged: Shell OilSir Andreas said that, even over the past three decades, which encom­pass years in the early 1990s when “the Commissioners lost substantial sums of money on unwise real-estate investments”, the average annual return worked out at 9.6 per cent. “Consistency has truly been a guiding principle.”

The managing director of Allenbridge investment advisers, John Harrison, who also teaches investment for charities at Cass Business School, London, described the Commissioners’ results as “im­­pressive. . . The Church Com­mis­sioners have been very good stewards of financial assets — not just in the last year, but also over the long term. To have achieved returns more than five per cent ahead of retail-price inflation so consistently over 30 years is impressive.

”The investment returns achieved in 2016 were exceptional, albeit boosted by strong equity markets and currency gains. Looking for­ward, the investment environment may become more challenging.”

About £231 million was paid to the Church of England by the Commissioners in 2016. Just over half went towards clergy pensions, and the remainder was split between paying for bishops and cath­ed­rals, and supporting mission and ministry in parishes and dioceses.

The Commissioners’ report also sets out their attempts to influence companies that they invest in to act on climate change. After they per­suaded Shell and BP to do more reporting on climate-change impact, the Commissioners last year moved on to mining companies, getting the backing of Rio Tinto, Glencore, and Anglo American on further climate-change disclosure.

Next week, the Commissioners will try again to ferment a share­holder revolt at ExxonMobil’s annual general meeting, after a reso­lution on climate disclosure which they filed last year failed (News, 3 June 2016).

But Mr Brown refused to say when the Commissioners would decide that disinvestment was their only option, if their attempts at con­structive engagement with Exxon­Mobil’s board continued to fail.

“We think being a shareholder gives us a voice,” he said. “Divest­ment would always be a very last matter. I’m not going to say to you if there’s a line, and where it is. We have to take every situation inde­pendently.

“There have been other stocks in the past that we have divested from if engagement hasn’t achieved that change that we had thought ap­­propriate.”

He also pointed to other ways in which the billions of pounds con­trolled by the Commissioners could be used to try to protect the en­­vironment, as in setting up the Transition Pathway Initiative.

The Initiative, supported by asset managers with more than £2 trillion of assets, publicly assesses how com­panies are preparing for the transi­tion to a low-carbon economy. Some eight per cent — nearly £700 million — of the Commissioners’ portfolio is now invested in renew­ables and low-carbon assets.

A lack of women on company boards and excessive executive pay are other two issues on which the Commissioners focus their share­holder activism, including voting against the majority of remunera­tion reports, and boards on which women form less than a quarter.

The earnings of the highest-paid member of staff at the Commis­sioners, their director of invest­ments, Tom Joy, dropped slightly from £463,000 two years ago to £461,000 in 2016.

His remuneration is almost six times that of Archbishop Welby’s, and almost 20 times that of a parish priest.

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