The Church of England has drawn up a set of principles to guide its decisions on investments in relation to climate change and emerging markets – with the aim of being fair to developing economies.

The UK religious organisation, which manages pension assets of some £3.7bn (€4.2bn) via the Church of England Pensions Board, announced on Friday: “We have published these draft guiding principles to provide the foundation for our continued work as part of an Emerging Markets Just Transition Investment Initiative that will support our investment decision making, investment approaches and future allocations to emerging markets (EM).”

The church said the draft principles had been developed following the 12 May announcement by 12 UK pensions funds representing £400bn of assets that they would work together to back the transition in EM.

The UK organisation revealed three guiding principles in response to three challenges it had identified.

The first principle is termed “Advocacy: Advocate for a fair transition in Emerging Markets”, and aims to tackle the problem of current approaches to the global climate transition failling to make enough allowance for a different speed of change and levels of policy and institutional support across emerging markets – as well as the fact the ideas do not enable a holistic approach to supporting a just transition at an economy-wide level, according to the Church of England.

To tackle the problem of existing investor frameworks for the global climate transition not covering a large part of the EM sovereign and corporate universe, the Church of England said it had set out a second guiding principle, worded “Policies and implementation: Align our policies and approaches to understand and enable a just transition in emerging markets.”

The third principle announced by the organisation is: “De-risking investments and capital allocation: Practically work to de-risk investments in support of intentional allocations within and across asset classes,” according to the draft.

Here, the church is aiming to address the challenge that more developed market funding is needed from both public and private finance.

“While DM [developing market] investors continue to invest in EM navigating political, legal and governance risks, building local expertise and accessing opportunities, there is still a significant financing shortfall and an urgent need to support the EM transition,” it said.

The church said it was now seeking constructive feedback on the draft principles to inform a final version it intended to publish by the end of the first quarter of 2023.

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