Investing sustainably: church investors challenged to think differently
On Thursday 6 October, church investors and ethical investment advisors from across the churches attended a conference organised by Operation Noah, The Climate Change Collaboration and Quaker Peace & Social Witness. The event, entitled “Investing sustainably: Protecting financial assets and supporting the transition to a zero-carbon future”, challenged the perceived barriers to scaling up investments in clean energy and other climate solutions.
The conference offered church investors and ethical investment advisors the opportunity to learn about and discuss the opportunities that exist for churches to invest in renewable energy and climate solutions while making financial returns. Representatives from several denominations were in attendance, including the Church of England, the Catholic Church, the Methodist Church, the United Reformed Church, the Baptist Union, the Church of Scotland and Quakers in Britain.
Bishop Richard Cheetham, Bishop of Kingston and member of the Church of England’s Environmental Working Group, delivered the keynote talk entitled ‘Your gospel is too small’, in which he reflected on the need for the churches to “respond to the biggest moral issue of our time”. In his talk he reflected on the interconnectedness of climate issues, resource issues and global inequality, and the need for change to be embedded in the overall system. He emphasised the need for a proper understanding of the Christian gospel to entail all five marks of mission, reflecting especially on Catholic Social Teaching (including Pope Francis’ encyclical Laudato Sì) and Anglican Social Theology.
Bishop Richard spoke of the need for a radical reappraisal of our culture and an inner ecological conversion, saying “There is a danger that we think the job is done [on climate change] with the Paris Agreement”. Among the practical steps that need to be taken, he highlighted the importance of longer term thinking with regard to investments and their impact on the environment, and the need to shift from technology based on fossil fuels to renewable energy.
Sian Ferguson from The Climate Change Collaboration then spoke about the work that several of the Sainsbury Family Charitable Trusts have undertaken to divest their portfolios from fossil fuels and invest in renewable energy and climate solutions. She reported on the decision made by trustees to allocate 15% of investments in impact investing with positive environmental, social and financial returns. While it was initially a challenge to find investments that would meet the trusts’ return criteria, it has become progressively easier over the last few years. Sian also explained that removing investments in fossil fuels had not had a negative impact on returns and this accorded both with academic research and data from MSCI.
Sian spoke of the range of fossil free investment options becoming available, with one investment management company reporting that they had seen a fourfold increase in requests for fossil-free products in the last year. “As asset owners we have tremendous capacity to do good”, she said, quoting from St Francis of Assisi: “Start by doing what’s necessary, then do what’s possible; and suddenly you are doing the impossible.”
Pilita Clark, Environment Correspondent for the Financial Times, chaired the panel discussion that followed. She said that the risk of stranded assets has now become widely accepted, referencing a speech given by Bank of England Governor Mark Carney on the topic last year.
Sarika Goel, Investment Researcher in Mercer’s Responsible Investment Group, spoke about investment products in sustainable energy sector and the importance of collective action. She highlighted a number of trends including the increasing number of fund managers seeking to incorporate more climate-specific exclusion criteria, the hedging of passive funds against climate risk, increases in ‘impact investment’ and an exponential growth in green bonds over the last 10 years.
John McKinley, Vice President – Impact Investing at BlackRock, spoke about changing attitudes to sustainable energy within the fund management sector. He highlighted the risks that climate change poses to investors and stated that “whether you are a values-based or mainstream investor, you should be concerned about climate change”. Furthermore, John added, technological developments are having a big impact, as demonstrated by the rise of electric vehicles and battery storage over the last year. He spoke about the importance of frameworks to ensure that green bonds result in positive environmental outcomes and the development of metrics to measure the impact of investments.
James Bevan, Chief Investment Officer at CCLA, talked about the challenges and opportunities of investing in renewable energy and climate solutions. He spoke of the need for investors to support new technologies and innovation, and called on asset owners to set mandates that require candidate asset managers to demonstrate that they understand climate challenges and opportunities. He also emphasised the risk of stranded assets, saying that “no one should be gambling with [investments in] coal and tar sands”. Furthermore, he said, companies will go out of business if they do not adapt to technological changes – stating that traditional hydrocarbon assets are “high risk and maybe much higher risk than many realise”. Finally, he spoke of the importance of engaging with companies, regulators and governments.
Finally John David, Head of Rathbone Greenbank Investments, spoke about the discussions they have had with clients around divestment, the options presented and the portfolio outcomes. Rathbone Greenbank has worked with Quakers in Britain on the divestment of its portfolio from fossil fuel companies and investment in renewable energy as well as other areas including energy efficiency and public transport. John gave the case study of the carbon intensity of the Britain Yearly Meeting (Quakers) portfolio, which is significantly lower than the average. However carbon intensity does not always tell the full story: public transport, for example, is highly carbon intensive but significantly reduces carbon emissions from private vehicles.
There was a sense of optimism in the room, recognising the challenges but also significant opportunities that exist for churches to support the transition to a net-zero carbon economy. The presentations were followed by questions and answers from the audience and roundtable discussions. One of the audience members pointed to the divestment announcement made by the Global Catholic Climate Movement on Tuesday 4 October that coincided with the Feast of St Francis of Assisi, in which seven Catholic organisations including the Columbans and the Jesuits of the English Canada province committed to divest from fossil fuels.
This event for national investors will be followed by an event for local church treasurers, finance officers and campaigners, taking place on Saturday 19 November at Friends House in London.
The full text of Bishop Richard Cheetham’s talk can be found here.