Our approach to engagement with companies Applying our Ethical Investment Policies and Stewardship Responsibilities Supporting Ethical Investment The Church Commissioners and Pensions Board aim to Stewardship is matched be at the forefront of responsible and ethical investment. The timeline below outlines key by ethical and responsible dates and interventions by the Our coordinated approach to The Church of England offers Both funds operate within their respective charitable and pension fund legal Church of England National frameworks. They owe certain fiduciary and other duties to their beneficiaries and investment practices Investing Bodies on the issue seek to meet these through a distinctly Christian and Anglican approach to investment. which reflect and support of climate change, including policy, engagement, voting “a Christian presence in every policies, associated investments, The Ethical Investment Advisory Group (EIAG) supports this approach, providing the Church’s wider interventions/engagement and and screening, as well as our community”, and this includes the advice to the Trustee Committees of the Commissioners and Pensions Board. responsibilities to society other significant events. The Church Commissioners and Pensions Board are also signatories to the United and the common good. willingness to partner with others investment community. The Pensions Nations Principles for Responsible Investment, and the UK Stewardship Code – which encourages institutional investors to act as good stewards of their equity Justin Welby, Church activities to achieve positive change, helps Board is pleased to not only adopt investments through active ownership, including monitoring, engaging and voting. Archbishop of Canterbury and interventions us realise our ambition to be robust ethical investment policies, Key Third Party activities at the forefront of ethical and but also to see real action through Key events related to responsible investment. its engagement and collaborative external policy environment Loretta Minghella, interventions such as the Transition First Church Estates Commissioner Pathway Initiative. 1986 1990 1997 Nov 2004 Dr Jonathan Spencer, Chairman, Church of England Pensions Board CofE Board of Social IPCC and Second World UN Kyoto ‘Environmental Statement’ Responsibility releases Climate Conference call Climate Agreement published by Ethical Investment ‘Our responsibility for for Global Treaty Advisory Group (EIAG) – a the living planet’ policy that is adopted by the National Investing Bodies 2001 1989 1994 2002 Feb 2005 Intergovernmental Panel United Nations Framework Carbon Disclosure Kyoto Protocol on Climate Change Convention on Climate Change Project (CDP) launched, comes into force (IPCC) established (UNFCCC) comes into force Commissioners and Pensions (196 signatory countries) Board are founding members B 01 Why engaging with companies is important How we seek change through engagement Engagement with companies by the Commissioners The Commissioners and Pensions Board believe active ownership and Engagement priorities 2018-2020 and Pensions Board is important because: engagement can drive positive change in corporate behaviour. • It challenges corporate practices that are inconsistent with We will: Engagement, voting, public statements and exclusions/ Where a severe ethical concern arises, intensive Climate Extractives Alcohol Governance Corporate the mission, witness and values of the Church; disinvestments are all tools that are deployed in the engagement takes place and progress is assessed • engage robustly and often at a Board-level; change tax interests of positive change. against agreed objectives and timeframes. • It can drive genuine and positive change in company behaviour, • use our votes at AGMs; as well as within key sectors; Engagements are typically based on indicators that • collaborate with other faith and non-faith investors; Disinvestment will not typically happen without • It can provide leadership for other investors and create have been developed to track and monitor company • withdraw our capital (disinvest) from those companies 150 Under development 32 350 50 engagement that gives companies a fair chance collaborations around areas such as climate change, performance. For example, we have taken a lead in the unresponsive to our engagement. Companies Companies Companies Companies at improvement, but ties have been cut with extractives and responsible alcohol production; development of the Transition Pathway Initiative (TPI) companies on ethical grounds. • Through our conduct, we can influence the thinking and Disinvestments will sometimes be made, either from a sector which has been developed with the Grantham Research actions of others, e.g. investee companies, peer investors or group of companies (e.g. thermal coal and tar sands Institute at the London School of Economics. This set and others in the financial markets. producers), or where a company is unresponsive to our of indicators track companies’ alignment to 2 degrees Indicators Indicators Indicators Indicators Indicators concerns (e.g. Vedanta Resources and Soco International). climate change scenarios. TPI London School of Under development Vigeo EIRIS’s ISS voting PRI and Ultimately, this helps shape a market that better serves the Such disinvestments are agreed with CCLA/CBF, ensuring Economics & FTSE Russell independent data and independent tax expert Nineteen Ethical Investment Policies set out the NIBs interests of the Common Good. alignment across all three of the National Investing Bodies annual assessments in-house position and approach on key policy issues. They are (NIBs). Perfection is not required in companies’ conduct, assessment available publicly on the EIAG web pages. however, there is an expectation that where we have concerns, companies engage with us sincerely. 2006 2008 2009 2013 Dec 2014 Apr/May 2015 May 2015 July 2015 Principles for Responsible Commissioners invest £150 UNFCCC CCLA launch ‘Aiming for A’ BP and Shell climate BP and Shell resolutions on Commissioners and During the York Synod the Investment (PRI) developed, million with sustainability Copenhagen backed by Commissioners resolutions filed by climate related disclosure Pensions Board divestment Archbishop of Canterbury calls supported by UN – outlining specialists Generation Climate Summit and Pensions Board Commissioners and Pensions pass with 98% support of £12m from tar sands and on Shell to stop Arctic drilling investment implications Investment Management, focussed on largest UK Board, with other investors thermal coal companies of ESG issues co-founded by Al Gore listed carbon emitters calling for disclosure of impacts of climate on their business 2015 Mar 2007 Jan 2008 2011 Sept 2014 2015 May 2015 Jun 2015 Jun/Oct 2015 Church Commissioners EIAG paper Pensions Board begins long Global Investor Statement Church of England starts to use National Investing Bodies Mercer publishes ‘Investing BP and Shell call for carbon and Pensions Board join ‘Climate Change Investment term programme to allocate on Climate Change calls on its voting at Company AGMs, launch new Climate in a Time of Climate Change’ pricing and an effective global Institutional Investors Group Framework’ published private infrastructure equity, governments to develop an voting against companies Change policy report, developed with climate change agreement on Climate Change (IIGCC) targeting funds investing ambitious global agreement that have low climate scores the input of the NIBs in socially useful assets, on climate change by the end on CDP disclosure including renewables of 2015 (signed by NIBs) 02 03 The Engagement Team Ethical exclusions Example of companies excluded in 2017 In 2016, a dedicated Engagement Team was established by the Commissioners The Commissioners and Pensions Board do Screen category Companies screened % of total exclusions and Pensions Board to lead work with companies on a range of ethical issues. not want to profit directly from, or provide capital to, Gambling 96 27.2 activities materially inconsistent with Christian values Defence 92 26.1 The Team’s responsibilities are: The Team also works closely with CCLA, on behalf of CBF Church and are mindful of the danger of undermining the • Analysing investee companies and developing tools to track of England Funds, on various engagement topics, such as alcohol Alcohol 51 14.4 company performance against our engagement priorities; and climate change. Engagement alignment and collaboration credibility, effectiveness and unity of the Church’s is sought across the three National Investing Bodies and we are Climate Change 41 11.6 • Screening companies against our ethical policies; witness, were they to do so. As a result, a range of also active members and sit on the steering board of the Church investment exclusions is maintained. Tobacco 31 8.8 • Engaging with companies Investors Group (CIG). CIG brings together Church Investors with (often in collaboration with other investors); over £17 billion in Assets Under Management and support important Each quarter, the Engagement Team oversees an assessment Special 20 5.7 • Voting at, on average, 2,500 company meetings annually; engagements on issues such as Modern-Day Slavery and Water. of 9,000 companies against our ethical policies. Following this High Interest Rate Lending/Predatory Lending 13 3.7 • Building collaborations with other Church investors – The engagement undertaken by the Church Commissioners and assessment, the Commissioners and Pensions