The Church Commissioners for England has reviewed its responsible investment strategy focusing on three key systemic risks: climate change, nature and biodiversity loss, and social inequality, according to its latest Stewardship Report released this week.

“The challenges posed by climate change, nature loss and social inequality are complex, so it is vital that companies and investors work together to combat these risks, which are affecting our world today,” said Alan Smith, First Church estates commissioner.

“Our integrated approach to responsible investment aims to affect real change in the wider economy through engagement and partnership working,” he added.

To help further embed this policy across the portfolio, the Church Commissioners has introduced new policy leads for net zero, social issues, and real assets sustainability, each tasked with producing and implementing new strategies as well as championing integration of sustainable practices across the Church Commissioners’ diversified portfolio.

Collaboration is a core part of the Church Commissioners’ approach to responsible investment, it stated. In 2022 the Church Commissioners evolved its approach to place greater emphasis and focus on addressing systemic risk.

Instead of addressing stewardship issues solely on a company-by-company basis, the Church Commissioners now seek to take action through involvement in collective initiatives, engaging with our managers and interacting with policy makers.

“Of course, all investors have investment policies, which include some environmental, social and governance (ESG) criteria, but ultimately the key metric is returns – often short-term returns. We take a much longer view,” Smith noted.

”The Church of England (CofE) is an ancient institution. Our job is to provide the maximum sustainable funding to support the mission and ministry of the Church in perpetuity. So we are focused on protecting and growing our assets over the long term,” he continued.

Alan Smith at Church Commissioners

“The hard truth is that the oil and gas industry is still not doing enough”

Alan Smith, First Church estates commissioner

He added: ”As a values-based investor, of course we also consider the greater good – of people, and of the planet. This is much more than an aspiration. It fundamentally informs how we approach our task, and we take this responsibility very seriously.”

Energy transition

Smith also noted that the Church Commissioners has “significant investments” in the energy transition, having invested in charging networks for electric vehicles, which “need to be in place for the EV revolution to succeed, and to succeed quickly”.

The Church Commissioners are investing in energy storage and generation, for example by installing wind turbines and solar panels across our estates. It also invests directly in energy efficiency and infrastructure as it seeks out ”promising investments” in companies that are leading the way towards the future, he said.

”All these technologies are of course vital to the transition – but we think they are also attractive investments as the world races to meet net zero goals,” he continued.

The Church Commissioners engages other investors through the Net Zero Asset Owner Alliance (NZAOA) and has co-founded a tool that provides insights into how well companies are doing on their climate goals – the Transition Pathway Initiative (TPI).

It uses TPI data to benchmark its own investments in fossil fuel companies which helps decide whether to continue to engage “in the hope of forcing real change – or simply to divest”, Smith stated.

“The hard truth is that the oil and gas industry is still not doing enough. While we believe that engagement can deliver results, if we do not see the results we are looking for, we have made it clear that we won’t hesitate to divest,” he said.

In July 2023, TPI data showed that none of the oil and gas companies in which the Church Commissioners held stakes had “passed our hurdles”, Smith said, and “that is why we divested all of our oil and gas holdings – a step we took with some sadness”.

The 2022 Stewardship Report shares success stories from the 2022 reporting period including the development of a deforestation policy, the successful issuance of two bonds including a sustainable bond, and the publication of research into its historic links to transatlantic chattel slavery.

Read the digital edition of IPE’s latest magazine