The investment arm of the Church of England has emerged from the roller-coaster effect of the pandemic with an investment return of 10.4% for 2020.

The performance by the Church Commissioners for England’s £9.2bn investment portfolio compared with a 10.0% gain in 2019, and beat its investment target of inflation plus 4%.

In their annual report, the Commissioners said: “In response to the pandemic, interest rates were cut to zero across the globe, central banks launched successive rounds of quantitative easing and governments have provided unprecedented fiscal stimulus. For financial assets, like equities, this has more than offset the impact of the economic drag caused by the pandemic.”

Loretta Minghella, first church estates commissioner, added: “The Commissioners’ active fund management approach came into its own last year, enabling us to maintain our funding for the Church despite the uncertainty that hit some financial markets.”

The public equity portfolio – 35.6% of total assets at 31 December 2020 – returned 18.3% versus its 13.2% benchmark.

However, among the star performers was private equity and venture capital – 9.5% of assets – with a total return of 33.6%, the Commissioners highlighting “exceptionally strong gains” in the last quarter of the year.

Within the real assets portfolio, timberland (4.7% of assets) delivered 41.3% over the year, strategic land 3.7% and rural 3.2%.

But the commercial portfolio (2.9% of assets) returned -12.8%, indirect property -8.7% and infrastructure -4.1%.

Meanwhile, cash holdings remain relatively high, at 10% of assets.

The fund’s average annual return has managed to beat its target over the major time frames, including the returns over the past 10 years (9.7%) and 30 years (9.5%).

In 2019, the fund had changed its return target, previously the Consumer Prices Index Including Owner Occupiers’ Housing Costs (CPIH) plus 5%.

In that year’s annual report, Loretta Minghella, First Church estates commissioner, had said: “Top of mind for the board and the investment team remains our overriding obligation to manage our investments in perpetuity. This decision reflects the more muted investment environment expected after more than a decade of rising asset prices.”

She added: “The commissioners believe the new returns target of CPIH plus 4% is both more realistic and consistent with the targets set by our peers. It is challenging, without encouraging undue risk-taking.”

Over 2020, the Commissioners put in place a new responsible investment policy underpinned by the two principles of respect for the planet and respect for people.

Following extensive engagement by the Church Commissioners and its national investment bodies (NIBs), 12 companies made changes to meet the NIBs’ 2020 climate change hurdles, while nine were excluded from investment because of failure to meet the hurdles.

By 2023, the Commissioners will divest holdings in fossil fuel companies which are not demonstrably on track to achieve the Paris Agreement targets to reduce climate change.

Meanwhile, last April the Commissioners announced an interim goal to reduce the carbon intensity of their investment portfolio by 25% by 2025. They have also put in place a new voting template targeting board and senior management gender and racial diversity.

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