The Church of England Pensions Board (CEPB) has become the latest asset owner to revise its policy for investing in defence-related companies.
The £3.2bn (€3.7bn) body announced it will tighten its rules to exclude firms that generate more than 5% of their revenues from defence.
Under the previous version, the threshold was 10%.
It will continue to exclude all companies with involvement in “indiscriminate weaponry”, such as nuclear arms, and will seek out data that helps it understand which companies are developing ‘dual use’ technologies and chemicals that may be used for defence.
The Board’s decision comes just a week after its sister organisation, the Church Commissioners for England, updated its own policy.
The two bodies are governed independently, but are advised by the same church-wide ethics council.
The Church Commissioner responded to the advice by scrapping its percentage-based threshold for screening out companies with revenues from offensive weapons.
Instead, it said at the time, it would conduct “a more nuanced assessment of what companies actually do”, which would make some companies more investors while others were excluded.
Today’s update from the Church’s pension arm goes firmly against the current trend amongst European asset owners, especially in the Nordics, to loosen their restrictions on investing in defence, in the face of aggression from Russia and broader geopolitical instability.
Last month, for example, PFA, Denmark’s biggest commercial pension provider, said its defence investments had grown from DKK793m before February 2022 to DKK7.7bn (€1bn), with one of the reasons being the adjustment of its exclusion criteria.
And last week, the chief executive officer of Finland’s €25bn state pension fund reportedly told the media that it was on the lookout for more private equity opportunities in the space, and was willing to invest directly into arms and dual-use technologies.
‘No guarantee on use’
In a statement, the CEPB said its new policy “follows careful reflection on the recently updated advisory paper on defence provided by the Church of England’s Ethical Investment Advisory Group, and a recent survey of scheme members’ views”.
That survey found that 82% of respondents wanted the board to actively support peacebuilding and human rights.
While its requirement to invest in UK sovereign bonds meant it automatically had exposure to the financing of the national defence programme, CEPB said: “In relation to direct defence investments, a more restrictive approach is reasonable and proportionate.”
It noted a warning from its advisory group that “there can be no guarantee about the way in which weapons may be used in line with Just War principles and about the use and misuse of defence-related products and services”.
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