Decision by Swedish Pension fund to drop fossil fuel companies shows financial and ethical considerations are now aligned and puts onus on Churches to demonstrate prudence.

Nearly 50 Churches and faith-based organisations around the world have now decided to disinvest from fossil fuel companies. They have done so for compelling theological, moral and scientific reasons. They are aware that climate change is already here and will intensify rapidly, hurting in particular poor communities in geographically vulnerable regions.

Maybe these organisations have also been aware of the financial reasons for disinvestment – that the fossil fuel companies are continuing to invest heavily in finding new reserves, despite the evidence that, if we are going to keep the increase in global warming below 2 degrees centigrade, over half of the world’s known reserves will have to be left untouched in the earth. This evidence has recently been endorsed by Mark Carney, the Governor of the Bank of England.

Two weeks ago, a Swedish national pension fund, the Second AP Fund, announced that they would begin disinvesting from fossil fuel companies. They said that they were reducing their exposure to the risk constituted by fossil-fuel based energy: this was a decision made to protect the fund’s long-term return on investment.

The decision of this pension fund was based on financial considerations alone. These considerations did not include the theological and moral case for disinvestment appropriate for Churches and faith-based organisations. Its decision adds to the evidence turning on its head the Church’s financial argument for maintaining investments in fossil fuel companies. Until recently, the moral arguments for disinvestment have been less persuasive because of the Church’s requirement to balance an ethical investment policy against the need to seek the maximum financial return for their investments consistent with commercial prudence.

These issues were discussed most notably in what is generally known as the Bishop of Oxford’s case.[1] The Court held that the circumstances in which charity trustees were entitled to make a financially disadvantageous decision for ethical reasons were extremely limited.

However, we have now reached a point where the ethical and the financial arguments all point in the same direction – to disinvestment.

If Churches and faith-based organisations wish to continue to invest in fossil fuel companies, then the onus will be on them to show why they are not pursuing a prudent long-term investment policy.

By Leonard Beighton, Operation Noah Board member
Photo: [Duncan]

[1] Harries (Bishop of Oxford) v Church Commissioners [1992] 1 WLR 1241.

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