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Church investors tighten voting on ethical issues

08 March 2019

Tax, gender, pay, and environment will come under scrutiny


THE Church Investors Group (CIG) has announced that it will vote against the chairs of FTSE 350 and Russell 50 companies that are not transparent in their tax reporting.

The CIG has also tightened its voting policy on climate change, gender diversity, disclosure of pay ratios, and the living wage.

The group includes the main investing bodies of the Church of England — the Church Commissioners, the CBF, and the Pensions Board — together with the Methodist Church. It has combined investment assets of about £21 billion.

In its latest voting policy, published this week, it pledges not to support corporate chairs and directors of companies which, it believes, are “out of line” with best practice on ethical issues. This includes, for the first time, companies with a score of zero for tax transparency in the FTSE ESG ratings.

The head of responsible investment for the Church Commissioners, Edward Mason, said: “We are aiming not only to challenge companies who aren’t reporting adequately on this issue, but also to signal to other investors that it is possible to use votes on routine AGM business imaginatively to reflect environmental, social, and governance concerns.

“Tax transparency has improved a lot in the UK, but the picture is very different in the US, and we have decided to take a stand.”

Regarding the climate, the current CIG policy is to vote against chairs of companies rated Level 0 or 1 by the Transition Pathway Initiative, an online data-analysis tool for investors to assess how companies are addressing climate change. It was launched by the national investment bodies of the C of E in 2017.

From this week, the CIG policy will also vote against the chairs of electric utility companies that do not have an emissions-reduction plan consistent with the Paris agreement, or whose disclosure is inadequate to make such an assessment.

The head of ethics and engagement for the Pensions Board, Adam Matthews, confirmed the move this week. “This represents a significant escalation of our stewardship of the sector, and, when we vote against the chair, we are clearly signalling to the board a growing loss of confidence.”

To support gender diversity, the CIG will vote against the chair of the nominations committee of companies that are constituents of the main indexes in Europe, the US, Australia, and New Zealand, but which do not have at least one female director.

The senior analyst for the Church Commissioners, Carlota Garcia-Manas, said: “There is clear evidence that companies with good corporate governance and diverse boards demonstrate stronger performance and have better reputations; so it makes sense to use our voting rights to further our long-standing stewardship goals.”

The CIG will also vote against remuneration reports of FTSE 350 companies that do not disclose the pay ratio between the chief executive and the average employee. It already abstains from approving remuneration reports of FTSE 100 companies that are not living-wage accredited, and will now do the same for telecommunications companies.

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