RCB responds to call for divestment from fossil fuels
The following article appeared in the Church of Ireland Gazette, 6th May 2016
By Sarah Dunne
Climate change is an extremely important, complex and topical issue. As the world faces the prospect of population growth to nine billion people by 2050, key issues of sustainability and environmental conservation are being proactively considered by the Representative Church Body (RCB) with respect to the investments it holds on behalf of the Church of Ireland.
A particular focus has been given in the past year to developing and implementing a policy in relation to climate change.
The Paris summit (COP21) has generated increased momentum around the need to act on climate change and to ensure that global warming does not exceed 2°C above pre-industrial levels, with an additional aim to cap this at 1.5°C.
The Church of Ireland investment strategy is committed to the support of a transition to a lowcarbon economy through a comprehensive approach, including reducing demand for fossil fuels through corporate engagement, positive investment in the low-carbon economy and promoting more ambitious public policy on climate issues through its membership of the Institutional Investors Group on Climate Change (IIGCC).
The Church recognises that climate change is part of a much wider discussion and is intricately linked with the challenge of sustainable international development.
Climate change calls for an urgent response from all of us individually, institutionally, nationally and internationally, including the Church as an institution and the Church as an investor.
The RCB Environmental Policy has evolved over the past several years. However, environmental sustainability is an area of rapid development and therefore policy is dynamic. Actions taken to date have included:
Whilst supportive of a transition to a low-carbon economy, the RCB recognises that energy is an input used in virtually all economic activity, and access to energy is thus of decisive importance to global welfare and development.
Furthermore, energy substitutes available at reasonable prices (taking subsidies into account) are currently inadequate and immediate action could result in fuel poverty for some of the least developed and vulnerable nations.
Notwithstanding this, the RCB has made significant progress and the portfolio demonstrates a positive bias in favour of renewable/green investments.
The view is that ethically motivated exclusion of all coal and petroleum companies based on their products alone (consumption is equally important) would not be appropriate at this time.
The Church of Ireland incorporates integration of climate-change risks and opportunities into investment decisions as well as its other ESG (environmental, social and governance) criteria.
Consideration of the financial risks from potentially ‘stranded assets’ must be assessed as part of the investment decision making process. Regulation in this area is changing rapidly and many companies are improving their practices and processes around climate change and increasingly allocating resources towards sustainable energy and carbon capture/storage which is a positive development.
The RCB will continue to seek companies with viable diversification strategies where possible.
Active ownership and dialogue shall remain the key tools for addressing climate issues in the management of the portfolios and to ensure that all investments, as far as possible, are consistent with the aim of supporting progress towards a low-carbon economy.
Sarah Dunne is the RCB’s Portfolio Manager.
From Fossils to Forestry: RCB invests in the future
By Sarah Dunne
Climate change is an extremely important, complex and topical issue. As the world faces the prospect of population growth to nine billion people by 2050, key issues of sustainability and environmental conservation are being proactively considered by the Representative Church Body (RCB) with respect to the investments it holds on behalf of the Church of Ireland.
A particular focus has been given in the past year to developing and implementing a policy in relation to climate change.
The Paris summit (COP21) has generated increased momentum around the need to act on climate change and to ensure that global warming does not exceed 2°C above pre-industrial levels, with an additional aim to cap this at 1.5°C.
The Church of Ireland investment strategy is committed to the support of a transition to a lowcarbon economy through a comprehensive approach, including reducing demand for fossil fuels through corporate engagement, positive investment in the low-carbon economy and promoting more ambitious public policy on climate issues through its membership of the Institutional Investors Group on Climate Change (IIGCC).
The Church recognises that climate change is part of a much wider discussion and is intricately linked with the challenge of sustainable international development.
Climate change calls for an urgent response from all of us individually, institutionally, nationally and internationally, including the Church as an institution and the Church as an investor.
The RCB Environmental Policy has evolved over the past several years. However, environmental sustainability is an area of rapid development and therefore policy is dynamic. Actions taken to date have included:
- Divestment from thermal coal;
- No direct investments in any company where more than 10% of its turnover is derived from coal mining;
- Coal is the highest carbon fossil fuel from which society must transition first (it accounts for approx. one third of total CO2 emissions in the US and three-quarters of CO2 emissions from power generation). Further divestment will be considered if companies are unresponsive to the need for transition to a low-carbon economy and do not respond to engagement;
- A commitment to increasing the portfolio’s lowcarbon investments in line with the RCB’s risk and return criteria (redeployment has taken place into a wide range of carbon-positive investments including wind, solar, energy efficiency and certified sustainable forestry);
- Becoming a member of the Institutional Investors Group on Climate Change (IIGCC) [December 2015];
- Investor stewardship is a vital lever for change. The RCB, in addition to its membership of the Church Investors Group (CIG), became a member of the IIGCC in December 2015. Engagement remains a key component of policy on climate change and collaboration is essential to achieve best results in this area. Engagement is proven to be effective and the CIG has seen significant improvement in CDP (carbon disclosure project) performance bands for the FTSE 350 companies with which it has engaged;
- Participation in shareholder resolutions under the ‘Aiming for A’ coalition. The coalition was set up by the investment service, CCLA, in 2012 and has undertaken to engage with the 10 largest UK listed extractive companies with a focus on carbon disclosure and deeper disclosure and transparency on these issues.
Whilst supportive of a transition to a low-carbon economy, the RCB recognises that energy is an input used in virtually all economic activity, and access to energy is thus of decisive importance to global welfare and development.
Furthermore, energy substitutes available at reasonable prices (taking subsidies into account) are currently inadequate and immediate action could result in fuel poverty for some of the least developed and vulnerable nations.
Notwithstanding this, the RCB has made significant progress and the portfolio demonstrates a positive bias in favour of renewable/green investments.
The view is that ethically motivated exclusion of all coal and petroleum companies based on their products alone (consumption is equally important) would not be appropriate at this time.
The Church of Ireland incorporates integration of climate-change risks and opportunities into investment decisions as well as its other ESG (environmental, social and governance) criteria.
Consideration of the financial risks from potentially ‘stranded assets’ must be assessed as part of the investment decision making process. Regulation in this area is changing rapidly and many companies are improving their practices and processes around climate change and increasingly allocating resources towards sustainable energy and carbon capture/storage which is a positive development.
The RCB will continue to seek companies with viable diversification strategies where possible.
Active ownership and dialogue shall remain the key tools for addressing climate issues in the management of the portfolios and to ensure that all investments, as far as possible, are consistent with the aim of supporting progress towards a low-carbon economy.
Sarah Dunne is the RCB’s Portfolio Manager.
Comments