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Are You Ready for National Ethical Investment Week? (14th to 20th October)

by Helen Wildsmith

Posted: 14 Sep 2012

There's a real buzz about National Ethical Investment Week (NEIW) this year - ECCR can't keep up with the demand for the Action Guide for Churches and we're helping organise more major NEIW events than ever. There is also an increased sense that the way we all deploy our financial resources has a critical role to play in the transition to a more socially just and sustainable way of living on planet earth. Last year's NEIW YouGov research showed that 42% of GB adults with investments want to "make money and make a difference".

As a client-owned investment manager CCLA sponsors the Action Guide for Churches because we think the time is right to raise awareness about green and ethical investment. We're owned by our Church, charity and public sector clients - organisations that epitomise the principle of collective endeavour for the greater good.

From the training we undertake with St Paul's Institute we know that the clergy increasingly want to engage with financial issues, particularly since the height of the financial crisis in 2008. They want to move beyond being intimidated by expertise to helping Christian's reflect on their role in the financial system at least as often as congregations consider Fair Trade issues.

Perhaps when NEIW is as well known as Fairtrade Fortnight (which started in the mid 1990s), we'll all register the pledges our annual reflections result in. It's certainly already becoming easier to take the first step on this important journey:

· Move Your Money focuses on who you bank with

· FairPensions helps you influence your pension fund

· The Ethical Investment Association enables you to find a local specialist financial adviser

· Your Ethical Money also covers insurance, mortgages, credit cards, student finance and child trust funds

· Trustees who oversee major investment portfolios can attend focused workshops at the Association of Charitable Foundations' conference or join the £12bn Church Investors Group

As City luminary David Pitt-Watson (son of Revd Professor Ian Pitt-Watson) reminds us in his article for this website: "Markets need morals. And if the Church with all its investments is to fully relevant to the debate, it needs not just to preach morality, but practice it in the way it manages money."

In July I joined a small meeting with two of the economists at the Grantham Institute for research on climate change and the environment at the London School of Economics (my own alma mater). We were discussing the wicked nature (in a Charles West Churchman sense!) of climate change (including the near term costs and the much longer-term benefits of responding), when one of the economists noted that we're facing a multi-decade stewardship challenge. I was immediately reminded of one of David-Pitt Watson's other points: "for most of its history, economics saw itself as a branch of moral philosophy". It felt like a call to action to Church investors in particular.

At the end of August, like George Monbiot, I was struck by the juxtaposition of the news from the Arctic and the Republican Convention in Florida. US presidential candidate Mitt Romney's joke that he will focus on US families rather than the planet, seemed to deny that an appropriate ecosystem is necessary for families to thrive over the generations (a real issue already for families in the developing world). It was certainly an odd joke to make in the same week that NASA announced that the annual Arctic sea ice melt had not only broken records in the satellite era, but that this had happened about three weeks before the end of the annual melting cycle.

Since NEIW 2011, the International Energy Agency has warned policy makers that "The door to reach two degrees [1] is about to close.  In 2017 it will be closed forever". Major energy technology transitions are rarely smooth, but rapid bumpier ones tend to pose more risks to investment portfolios. As I noted last year stranded assets are a real risk for investors, while the public policy response to climate change remains uncertain. Over the last year we've been engaging with policy makers through IIGCC and will be hosting a dinner for global policy makers and investors next month.

However, because of the systemic nature of the sustainability challenge and the difficulty individuals face in moving from NEIW reflection to action, we've also developed "Aiming for A". The Carbon Disclosure Project (CDP) recently started assigning a Carbon Performance Band (from A to E) to companies with sufficient disclosure using a methodology developed with accountancy firm PwC. The bands aim to reflect "the ambition and success of a company's short and long-term actions to mitigate climate change".

CCLA has been building an "Aiming for A" coalition of faith and pension fund investors (including the £100bn Local Authority Pension Fund Forum, the Central Finance Board of the Methodist Church, and the Church of England's three national investing bodies). We would like major UK-listed companies in the extractives and utilities sectors to aim for an A - the highest performance band. Earlier this month CDP announced the 2012 performance bands for the companies that we're currently interested in:

A: Anglo American (up from a C)

B: BG Group (down from an A); BHP Billiton (no change); Centrica (down from an A-); Royal Dutch Shell (down from an A-); SSE (not in Global 500 in 2011)

C: BP (down from a B); National Grid (up from a D); Rio Tinto (down from a B); Xstrata (no change)

We are currently planning to co-file supportive shareholder resolutions at some of these companies' Annual General Meetings (AGMs) in 2013/14. This should help amplify long-term investors' requests, to the companies that we expect to hold in our portfolios for many years, about the need to balance the short- and longer-term aspects of shareholder value creation.

Importantly individuals will be able to ask pension funds, insurance asset managers, ISA providers and other investment managers who act on their behalf, how they voted on these critical shareholder resolutions. As Martin Taylor, chief executive of the Royal Society of Arts said in his 2008 UKSIF Annual Lecture "citizen engagement is the key to accountability in the financial system".

Enjoy NEIW 2012 and, if you haven't done so already, do sign-up for NEIW e-mail alerts so that you have enough time to plan for NEIW 2013 and help major UK-listed companies "Aim for A".

About this author

Helen Wildsmith is the Head of Ethical & Responsible Investment at CCLA Investment Management Limited.


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Disclaimer

The opinions expressed in this article are those of the author, and do not necessarily represent the views of St Paul's Institute or St Paul's Cathedral.