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C of E Pensions Board dropped fossil-fuel suppliers. Now it will target users

01 December 2023

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THE Church of England Pensions Board has published a plan that aims to reduce climate risk across its investment portfolio and the global economy by promoting the drive away from fossil-fuel use.

Its first Climate Action Plan, published on Thursday, says: “Climate change presents an urgent, systemic threat to the planet and its inhabitants. This means it poses a direct threat to our beneficiaries and the communities they live in.”

As an “ethical investor”, it says, it is seeking to consider “the impact our investments have upon the environment, and in particular the poorest communities”. Besides the risk that climate change poses to the Pensions Board’s beneficiaries, there is “a foreseeable and material risk to investments and the global economy”.

The plan has two principal aims: “transitioning the economy away from fossil fuels”, and “aligning financial flows with the aims of the Paris Agreement, including increasing investment and financing for climate solutions, in line with our beneficiaries’ interests.”

It seeks to achieve these aims in six ways:

  • establishing targets, commitments, and governance to oversee the strategy and its implementation;
  • engaging with policymakers, including “challenging negative climate lobbying from our portfolio companies”;
  • building tools, knowledge, and data required “to direct capital towards the transition to net zero”;
  • applying pressure to companies in which the Board holds shares to act on climate change;
  • monitoring appointed asset managers to ensure that they are investing in line with the Board’s climate policies; and
  • aligning the Board’s portfolio with net zero, including “regular stress-testing of our portfolio against climate risks”.

The plan refers to the Board’s decision this year to disinvest from the oil and gas sector, “given that no companies met the threshold of 1.5°C alignment” (News, 23 June).

It continues: “Any future consideration of reinvestment in an oil and gas company would require clear, independent evidence of robust, aligned short-, medium- and long-term targets, and a credible transition plan detailing aligned capital expenditure and corporate lobbying.

“Importantly, our engagement with oil and gas majors underlined the urgent need for investors to focus not just on the supply of fossil fuels but also on the demand for fossil fuels like coal, gas, and oil. If we do not significantly change demand, we will not ultimately change those supplying it. Therefore, our focus for our engagement has shifted to driving commitments from demand-side companies to reduce as quickly as feasible their dependency on oil, gas, and coal.”

The Board’s chief responsible-investment officer, Adam Matthews, said on Thursday: “In serving our pension scheme members, we are focused on protecting their retirements in the long term.

“Climate change is a clear and present risk that will be far more damaging to investment portfolios and to the global economy if we fail to transition to net-zero in an orderly, timely way. This is why our Climate Action Plan focuses on key systemic risks like demand for fossil fuels, corporate climate lobbying, climate finance in emerging markets, and seeking strong ambition from companies.”

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