The Church Commissioners for England has updated its policy for investing in defence.
Under the new rules, the endowment will no longer exclude stocks based simply on what percentage of their global revenues come from offensive weapons.
Instead, it will conduct what it described as “a more nuanced assessment of what companies actually do”.
“In practice, this means some defence companies will become investible while others will become un-investible,” said the Church Commissioners in a statement announcing the update.
“For example, under the previous policy, we could theoretically invest in a large company from an oppressive regime generating less than 10% of its revenue from offensive weapons, but not in a firm earning more than 10% from supplying protective personnel equipment to the Ministry of Defence.”
The new approach will make it “harder to invest in companies linked to oppressive regimes, while enabling responsible investment in NATO and UK defence-related business”, it added.
The endowment’s previous policy had not been altered since 2010, but recent geopolitical and technological developments have forced asset owners across Europe to rethink their investments in defence.
A number of pension funds, including Sweden’s KPA Pension and Denmark’s Akademikerpension, have loosened their restrictions around investing in weapons this year.
The Church Commissioners insisted that today’s update did not represent a more lax approach to the topic, “but rather a sharpening of the criteria we use to evaluate potential investments – the aim being to ensure a more rational, responsible approach aligned with our human rights policy and focused on ethical business conduct”.
The decision was made following advice from its ethical advisory group, and all investments will still have to satisfy its existing policies on human rights and other ethical criteria.
Companies involved in controversial weapons such as cluster bombs, landmines, chemical and biological weapons will remain strictly excluded, the fund added, and “all potential investments will be screened for controversies and for links to oppressive regimes”.
The Church Commissioners recently kicked off a project to develop principles for responsible investments into deference, in collaboration with Schroders, LBP Asset Management, Skandia and others.
The coalition said there was an “urgent need for a set of global principles to help investors navigate the challenges of investing in defence-related companies”.
Its latest announcement was made just days after Sweden’s AP funds came under fresh fire over their investments into 12 companies allegedly linked to Myanmar’s military regime.
A report published on Friday by three NGOs concluded that Sweden’s buffer funds – AP1, AP2, AP3, AP4 and AP7 – had together invested nearly $500m in the companies, which are accused of supporting the junta through the sale of weapons, provision of surveillance or the allocation of finance.
Swedish Burma Committee, Justice For Myanmar and Fair Finance Guide identified AP7 as the biggest investor in the 12 companies, which include major Indian firm Bharat Electronics.
In response, AP7 confirmed it was reviewing its holdings and could decide within weeks whether to divest some of the companies.
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