Epworth is a PRI Signatory and takes its obligations seriously.
The PRI is the world’s leading proponent of responsible investment.
It works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole.
The PRI is truly independent. It encourages investors to use responsible investment to enhance returns and better manage risks, but does not operate for its own profit; it engages with global policymakers but is not associated with any government; it is supported by, but not part of, the United Nations.
For more information go to https://www.unpri.org.
Epworth Investment Management (‘Epworth’) has long recognised the challenges posed by global climate change. To help direct its selection of investments, in 2009 Epworth adopted a climate change policy, which has since been supplemented with two further policies: electricity generation; and different fuel types. The fundamental aim of these policies is to ensure that companies in which Epworth invests are consistent with a target of reducing the UK’s greenhouse gas emissions by 80% from 1990 levels by 2050, and limiting increases in global temperatures to 2°C.
One of the guidelines provided by Epworth policy on climate change is: “To create and manage portfolios with a carbon footprint that is relatively low and measurably declining”. As a result since 2015, Epworth has commissioned an annual carbon footprint analysis of the UK portion of its Affirmative Equity Fund for Charities (AEFC) from Trucost, and signed up to the Montréal Carbon Pledge committing to a voluntary disclosure of the results. All the data in this report are to 28 February 2017.
Trucost estimates the total greenhouse gas emissions of each company within the portfolio and the relevant benchmark, estimating both the portfolio’s proportionate share of each company’s emissions, and that of the benchmark. These emissions are then summed to provide the total greenhouse gas emissions of the portfolio (in tonnes of CO2 equivalent (tCO2-e) per million pounds of market capitalisation) and for the benchmark. More details of Trucost’s methodology can be found on its website: www.trucost.com
According to the Trucost analysis, at 28 February 2017 the carbon footprint of the UK portion of the Affirmative Equity Fund for Charities was 270tCO2-e per million pounds of market capitalisation. This was 3.0% lower than its relevant benchmark, the FTSE All Share Index at the same date.
The main reasons for the outperformance were that in more polluting sectors such as utilities and basic resources the Epworth portfolio was significantly less intensive than the overall stock market. Interestingly the tobacco and alcohol sectors act to reduce the carbon intensity of the market. Despite excluding these relatively ‘clean’ sectors on other ethical criterion, the Affirmative Equity Fund for Charities has a lower carbon intensity than the market as a whole.
The change in the Affirmative Equity Fund for Charities footprint is estimated by dividing the total carbon footprint of the Fund (measured in tCO2-e) by the number of units in the Fund; this compensates for changes in size of the Fund due to inflows/outflows and movements in market values. The table below compares the total footprint of the fund, the number of units and the trend in emissions per unit.
|AEFC total emissions (tCO2-e)||AEFC units in issue||“Emissions per unit (kg per unit)”|
This would suggest that the carbon intensity of the portfolio fell by 12.6% between 2016 and 2017.
The analysis is based on the UK portion of the Affirmative Equity Fund for Charities, which comprised £68.63m as at 28 February 2017.
In line with the aims of its policy on climate change, Epworth seeks to continue to reduce its portfolio carbon footprint through the prioritisation of good environmental performance as a factor in investment decisions. Epworth is also working to persuade all companies that are heavy users of fossil fuels to reduce their carbon footprints through initiatives such as ‘Aiming for A’ and the ‘CDP Climate Change Program’. In addition, climate change issues have been integrated into Epworth voting practice which means that we will oppose the re-election of the Chair or members of appropriate board committees if a high-carbon footprint company is failing to improve its emissions performance.
For further information on Epworth’s work on climate change or to feedback on these results please contact us.
The UK Stewardship Code was published by the Financial Reporting Council in July 2010. It aims to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities by setting out good practice on engagement with investee companies to which the Financial Reporting Council believes institutional investors should aspire.
The Central Finance Board of the Methodist Church (CFB) and Epworth Investment Management Limited (Epworth) signalled their support of the Code in a preliminary response issued in November 2010.
The CFB and its sister organisation, Epworth, welcome publication of the Stewardship Code and this Statement publicly signals our endorsement of the Code’s Principles. The Principles of informed engagement with companies set out within the Code, lie at the heart of our investment approach; the Stewardship Code provides a valuable, additional context for enhancing the responsibilities of shareholder ownership.
Our detailed Statement in response to the seven Principles contained within the Code is set out below, and this incorporates revised recommendations made in autumn 2012.
“Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities”
Our detailed position papers and policies are published on our two websites: www.cfbmethodistchurch.org.uk/ethics, www.epworthinvestment.co.uk/investment-approach/ethical-policy-and-guidance/
“Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed”.
“Institutional investors should monitor their investee companies”
“Institutional investors should establish clear guidelines on when and how they will escalate their Stewardship activities.”
“Institutional investors should be willing to act collectively with other investors where appropriate”
The Chief Executive of the CFB is the named contact for collaborative engagement
“Institutional investors should have a clear policy on voting and disclosure of voting activity”
“Institutional investors should report periodically on their stewardship and voting activities”
Our stewardship activities are an integral part of how we manage our Funds on behalf of the Methodist Church and our Epworth clients. These activities are fully integrated into our operating compliance procedures and reporting lines through the Church and to Epworth clients.
This Statement has been endorsed by the CFB Council and the Epworth Board.