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Pensions Board’s first annual stewardship report highlights mining safety and climate change

23 March 2021

In 2020, the Board engaged with more than 630 companies on these and other issues

ALAMY

In January 2020, a Brazilian artist works on a mural in Sao Paulo, Brazil, to honour victims of the collapsed tailing dam in Brumadinho in 2019. It is painted with dirt and mud brought from the site of the disaster

In January 2020, a Brazilian artist works on a mural in Sao Paulo, Brazil, to honour victims of the collapsed tailing dam in Brumadinho in 2019. It is...

THE Church of England Pensions Board has pledged to establish an independent Global Institute on Tailings Dams to prevent the “widespread environmental damage and long-lasting devastation” caused by their collapse.

The self-financing institute, to be established in partnership with the United Nations and the Swedish National Pension Funds’ (SNPF) Council on Ethics, would manage the implementation of the new Global Industry Standards on Tailings Management, which were developed after the collapse of a tailing dam in the Brazilian state of Minas Gerais killed 270 people (News, 8 February 2019).

The plans were published in the Board’s first annual Stewardship Report 2020 on Tuesday. The report sets out in detail the approach of the Board to its responsible investments over the past 12 months, both ethical and financial; its priorities in these areas; and its stewardship progress.

“The disaster in Brumadinho, Brazil, should never have happened,” it says; nor should the decision taken by the chief executive of the Rio Tinto mining giant to destroy two caves in Pilbara, Western Australia, in May 2020, to expand an iron mine (News, 18 September 2020). Neglecting the systematic risk of tailings facilities would have a “catastrophic effects on people and the environment”.

In 2020, the Board and the SNPF Council on Ethics asked 350 mining companies on behalf of investors with $23 trillion in assets under management to support the new standard, and to set out a timeline for compliance, which is only mandatory for members of the International Council on Mining and Metals. It also wrote to 78 of the world’s largest mining companies, requesting a review of their relationships with First Nations communities and indigenous peoples, the report says.

It explains: “It would be easy as an investor to walk away from the mining sector, but that would be at odds with the demand society has for the resources that are mined, many of which are essential for modern life as well as the low-carbon transition. Through the Anglican Communion we are also uniquely exposed to the impact of mining in many communities.”

The Board plans, among other things, to lobby for a rapid transition to net-zero emissions in the operations and use of mined products; to protect workers and communities impacted by automated mining tools; to protect the rights of indigenous communities to ensure heritage sites are respected and protected; and to highlight the relationship between mining and child labour.

The Board, which is one of the Church’s three National Investing Bodies (NIBs), alongside CBF Church of England Funds and the Church Commissioners, has more than 41,000 pension-scheme members (clergy and church workers) across about 700 church organisations. It holds more than £3 billion in assets under management, which return about 9.4 per cent each year, the report says. Annualised returns over the past five years have been about ten per cent.

Most of these assets are in public equities (£1.47 billion); and infrastructure and property assets total about £587 million. Private debt (£150 million), corporate bonds (£86 million), and private equity (£25 million) are also listed. The Board says that it uses these assets to influence company behaviour on issues such as climate change, indigenous community rights, mining safety, diversity, and executive pay.

In 2020, it engaged with more than 630 companies on these and other issues and voted on more than 39,000 company resolutions, of which 17.1 per cent were against management and 75 per cent were against executive pay packages, the report says.

To ensure its continued responsible investment, the Board also screens 10,000 companies every three months for links with sectors to which there are ethical objections, including pornography, alcohol, civilian firearms, gambling, tobacco, defence, and climate change. If links are found, the Board disinvests. In 2020, it restricted its investments in 459 companies, most of which had links to gambling (114), alcohol (86), defence (80), and climate change (56).

In July 2018, the General Synod voted on a motion seeking to ensure that, by 2023, the NIBs have disinvested from fossil-fuel companies that are not prepared to align with the Paris Agreement. Since then, 12 companies have made sufficient progress, and investments in nine were restricted to a total of £32.23 million across the NIBs.

The carbon intensity of the Board’s public-equity portfolio is currently 42.3 per cent below the relevant benchmark. Its aim is for the carbon performance of these holdings to be in line with the Paris Agreement by 2023. The Board also aims to be Net Zero by 2050, or earlier.

In 2020, it launched the FTSE-TPI Climate Transition Index, which enables investment funds to link their investments to the progress that companies are making in line with the Paris Agreement (News, 31 January 2020). The Index builds on the work of the Transition Pathway Initiative (TPI) (News, 13 January 2017). By the end of 2020, the Board had about £800 million invested through the Index.

The chair of the Board, Clive Mather, explained: “No single pension fund is sufficiently influential to tackle all the challenges of climate change. However, when we come together, we can make a huge difference. . . This puts us in the best position to serve the long-term interests of our beneficiaries and stakeholders. Developing the FTSE TPI Climate Transition Index. . . demonstrates that, even if you are passively invested, you can still be very active in your stewardship responsibilities.”

The Board is also part of the Institutional Investors Group on Climate Change (IIGCC), which forms part of the $53-trillion-backed Climate Action 100+ initiative — another way of lobbying chief executives, including Royal Dutch Shell, to commit to become net-zero aligned (News, 8 January 2021). It plans to launch a New Global Standard on Corporate Climate Lobbying in partnership with the AP7 pension fund in Sweden and BNP Paribas Asset Management.

Adam Matthews, who is the chief responsible-investment officer for the Pensions Board, said on Tuesday: “Our approach to date has demonstrated that we can drive real world change in the interests of our long-term investments in companies, our members, and of society.

“As we move through this critical decade, the Board has set two strategic stewardship priorities, covering issues that will impact our members and the world they will retire into: climate change and extractive industries. These issues are inextricably linked and require systemic changes in the way companies operate, pension funds invest, and in how we steward our assets.

“We know that no single pension fund or investment manager is sufficiently large or influential enough to drive change at the scale that is required. We therefore work in partnerships with others, leading major collaborations across the finance sector and intend to continue this approach.”

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