14

Jul

2020

Guest blog: Methodist Council to debate fossil fuel investments

 

Revd John Howard, former Chair of the Methodist Church’s Joint Advisory Council on the Ethics of Investment (JACEI) from 2008-2016, seconded a motion on fossil fuel divestment at the Methodist Conference last month. In this guest blog, he offers reflections on the 2020 Conference and the important decisions to be made at Methodist Council this autumn.

Revd John Howard, former Chair of JACEI

Towards the end of June, the Methodist Conference – the governing body of the Methodist Church in the UK – met virtually using Zoom, which many of us have become more familiar with in recent months!

In 2017, the Methodist Conference passed a Notice of Motion calling on the Joint Advisory Committee on the Ethics of Investment (JACEI) to report back to Conference, with the expectation that if any oil and gas company had not aligned its business investment plans with the Paris Agreement target ‘well below 2°C’, there would be a recommendation to disinvest from such a company by the 2020 Conference.

Last month, the Central Finance Board announced its decision to disinvest from BP and Total, but to continue investing in four oil and gas companies: Shell, Repsol, ENI and Equinor. In its report for the 2020 Conference, JACEI argued that in its view, these companies ‘are aligned, or are close to being aligned with the Paris Agreement’.

Yet, as Martha Rand, a member of Youth Assembly, highlighted in her excellent speech at Methodist Conference: ‘Being close to aligned with the Paris Agreement is not what the 2017 Conference voted for.’ It is therefore clear that the Central Finance Board and JACEI, unfortunately, have not fully implemented the Notice of Motion passed at the 2017 Conference. It is also debatable how close their alignment is.

Over the years, the Methodist Conference has developed various procedures to manage the meeting – one of them being that when Notices of Motion are brought to the Conference, the Connexional Treasurer comments upon its financial implications. The original intention was to advise the Conference when specific expenditure was implied, such as a decision to write a report, meaning that staff time was needed to fulfil this work. However, in recent years it has increasingly been the case that the Treasurer has made comments of a more general nature reflecting their own views. That clearly happened this year when the Conference considered disinvestment from fossil fuels.

The Treasurer’s response to this Notice of Motion included the following:

  • ‘This Notice of Motion has significant financial implications which are yet to be assessed, involves a significant change in our investment policy, and is likely to have ramifications for the pension schemes, Connexional Funds, the Central Finance Board, local churches and circuits.
  • Over the longer term oil & gas companies are a major source of portfolio income – with no exposure at all the dividend income arising to churches will fall significantly. The recent disinvestment from BP is already having an impact…
  • This Notice of Motion has significant implications for the life of the whole Connexion.’

These arguments represent the main ones presented against the case for disinvestment from fossil fuels by the Methodist Church. Since the debate at Conference, I have received correspondence about this matter and been involved in several conversations with fellow Methodists. The comments received have expressed shock that the arguments used against the Notice of Motion were not about how we might respond to the climate emergency in an ethical way, or how we might use both our influence and our financial resources to lessen the impact of the climate crisis, but simply to be concerned about our income from investments. It has been pointed out that these arguments taken to their logical conclusions would mean that we invest in the arms trade, alcohol or other sectors we rightly consider to be unethical. Are we only interested in ethics if it is not going to cost us financially?

Even if the ethical case is not the foremost consideration in the mind of investors, there is a question regarding the wisdom of investment in companies that make their money from fossil fuels when huge efforts are being made to reduce our use of such fuels. Meanwhile, oil and gas companies continue to spend huge amounts of money exploring for new oil and gas reserves, when such assets may become worthless in the future.

One of the three Church of England National Investing Bodies, managed by CCLA Investment Management, recently sold its remaining shares in oil and gas companies (Shell and Total) for financial reasons. CCLA made the decision ‘on the basis of the financial risks posed by the short to medium term outlook for the oil and gas markets.’ This further calls into question the assessment of the Connexional Treasurer, which completely ignored the financial risk of fossil fuel investments, which former Bank of England Governor Mark Carney has highlighted on multiple occasions.

While such companies may have provided healthy dividends for investors in the past, this is unlikely to be the case in the future. Shell cut its dividend by two-thirds in April, and both Shell and BP have recently written off tens of billions of pounds of assets.

My fundamental conviction, however, lies in the view that the Church must be ethical in its investments whatever the cost. Fortunately, it is the case that ethical investments have a record of being sound financially. When considered across the economic cycle, it is generally concluded that ethical investments perform at least as well as a portfolio that has no ethical constraints.

I was encouraged to read that the President and Vice President of the Methodist Conference were among the Church and other faith leaders who signed a recent statement calling on the UK government to support a green recovery from Covid-19. What future will the Methodist Church choose with our investments? Will we seek to return to business as usual which has been fuelling the climate crisis, or choose instead to invest for the future of our children and grandchildren?

The Notice of Motion was accepted but amended to refer it to the Methodist Council. This will clearly mean that the arguments need to be rehearsed again in that forum. However, the decision of the Methodist Conference to pass the amended resolution does mean that Conference has accepted the arguments made on disinvestment from fossil fuels.

I sincerely hope that Methodist Council will support the full implementation of the 2017 Conference motion when it meets this autumn, so that the Methodist Church can demonstrate moral leadership at this key moment in history.

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