Roz Amos, Chief Investment Strategist
There has been a lot of recent news coverage about issues within the banking system. We explain below what has been happening and why, although the situation warrants caution, we do not believe this is the start of a financial crisis.
Last year, it became clear that central banks needed to significantly tighten monetary policy in order to contain rampant inflationary pressures. Central banks have pulled two monetary levers – they have raised interest rates from historic lows and have cut liquidity in the financial market by beginning to unwind some of the money they have printed and injected into the system since the global financial crisis 15 years ago. Interest rates raise the cost of financing, but liquidity focuses on the availability of that financing in the first place, and this latter issue has been a key factor in some of the headlines from the world of finance over the last few weeks.
We downgraded our near-term views on economically sensitive asset classes in the second half of last year, and for the first time in many years we became more positive on bonds and cash investments. A key reason for this is that history tells us that when such monetary tightening takes place in the global economy, particularly with the speed and size of the changes witnessed over the last 12 months, it normally leads to shocks in the financial system as market participants requiring funding can suddenly run into difficulty.
A small example of this was the ‘Liability Driven Investment crisis’ that impacted the UK pension system in October last year, though thankfully that remained relatively well contained in the UK, thanks to some swift mitigating actions by the Bank of England and a change of fiscal approach by the UK Government. However, we have been expecting more shocks to emerge, and another example has materialised in the US regional banking system over the last couple of weeks, where three smaller banks were forced into rescue deals or collapse after running short of funds, as a result of the significant changes in price and availability of credit in the system that these banks had not apparently planned for.
Another more significant example has made headlines in Europe over the last week, culminating with Credit Suisse being acquired by UBS in a deal brokered by the Swiss National Bank. These instances have led to the market testing and questioning the strength of the broader banking system, and fears about where the next collapse could lie, with memories of the financial crisis in 2008 still fresh in many minds. Central banks are responding swiftly, making credit available to try and avoid further loss of confidence in the system. Nonetheless, share prices in banks have taken a hit in recent days, though at this point we think no other large, globally significant institution is struggling to the extent that Credit Suisse was. This has weighed on broader equity markets, whilst sovereign and high quality corporate bonds have outperformed as investors seek safe havens.
We do not believe this is the start of a new financial crisis. Banks are better capitalised than they have been in the past and large regulators and central banks are very mindful of the risks of the disorderly collapse of large institutions. Witness the actions of global central banks and regulators to support their banks, and the strong statements and efforts to protect depositors from loss. But these shocks will serve to further tighten the availability of credit in the near term, and may well lead to more negative headlines as other companies run into difficulty. This will likely weigh on the economic growth outlook and increases the chances of a deeper recession, which rather perversely implies that central banks may back off from further material interest rate rises.
We are not complacent- crises of confidence can turn into real crises very quickly in the banking system, as Credit Suisse’ fate demonstrates, and even strong central bank support was not enough for it to remain as a standalone entity. Rising interest rates and volatile bond markets remain a risk. At this point it seems that the risks are being contained but we will continue to monitor the situation and act where necessary.
March 2023
Epworth Investment Management (Epworth) believes that for both ethical and fiduciary reasons, Russian securities should not form any part of our clients’ investment portfolios.
Epworth Investment Management was delighted to sponsor the Children and Youth Award at the Charity Awards 2021, which was held virtually on 10 June 2021. After a very challenging year for UK charities, it was a great way to celebrate the fantastic work and achievements of the charity sector.
Roz joins in the newly created role and will be responsible for all matters relating to the investment functions of Epworth and the CFB.
Epworth Investment Management (Epworth), the UK investment manager dedicated to serving the needs of churches and charities, is pleased to announce that Roz Amos has today joined as Chief Investment Strategist. Roz will be responsible for all matters relating to the investment functions of Epworth Investment Management and the Central Finance Board of the Methodist Church, including defining and executing the investment strategy, asset allocation, and fund performance.
Prior to joining Epworth, Roz worked at UBS Asset Management, chairing their Product Strategy Board, helping build the global product range and develop an innovative product shelf and strategy. Before that, Roz was an investment consultant with Willis Towers Watson, where she started her career, working in both London and Sydney. Over the course of her 15 years with Towers Watson, Roz advanced to head the New Ideas and Indexation research teams; worked with several of the world’s largest asset owners on investment strategy and manager selection; and gained immense skill in portfolio and product design. Her extensive experience across asset allocation and risk management will lend itself well to Epworth’s development of investment solutions for the charity sector.
In recent years, Epworth’s offering has grown considerably to meet the increasingly diverse needs of its clients, with the establishment of three new investment funds: the Global Equity Fund for Charities, the Epworth Multi-Asset Fund for Charities, and most recently, the Epworth Climate Stewardship Fund. As the organisation grows in terms of both strategies and mandates, Roz will form a valuable addition to the senior management team, and lead the investment team, while building on the existing foundation and further enhancing our offering to clients.
David Palmer, Chief Executive, commented:
“I am very pleased to announce Roz’s decision to join Epworth Investment Management. Epworth has undergone a tremendous amount of development and this has underscored our need for the strategic skillset that Roz brings to the team. We are delighted to be welcoming Roz and are very much looking forward to working with her as the organisation continues to grow.”
Roz Amos, Chief Investment Strategist, commented:
“Having observed Epworth go from strength to strength, I am now delighted to be joining the team to build on the excellent work already accomplished. Epworth is an ambitious organisation with excellent people – I am looking forward to working with them and helping our church and charity clients achieve their investment objectives”.
“The CFB and Epworth have long been committed to engaging with companies around issues that negatively impact the poor and God’s creation. The pace of change across the oil and gas sector has been inadequate and we welcome the recommendation of JACEI to disinvest.” David Palmer, Chief Executive Officer
30 April 2021
Epworth Investment Management Limited and its parent, The Central Finance Board of the Methodist Church have sold their remaining company holdings in the oil and gas sector, including Royal Dutch Shell.
This follows advice received from the Methodist Church’s Joint Advisory Committee on the Ethics of Investment (“JACEI”) in April 2021, that no companies in the sector are currently aligned with the climate change targets set out by the 2015 Paris Accord.
For over three years, JACEI has been assessing companies in the oil and gas sector against the targets set by the Paris Accord using a number of metrics. The Methodist Church recognised the climate emergency at its 2019 Conference and is in the process of determining how it might bring forward to 2030 its commitment to achieve net zero emissions.
Revd Dr Stephen Wigley, Chair of JACEI, commented:
“The Committee has determined that the slow pace of corporate change means that the oil and gas sector is failing to meet the targets set by the Paris Accord. Shell, along with its peers, is currently failing to play a substantial enough role in addressing the climate emergency.”
David Palmer, Chief Executive, commented:
“The CFB and Epworth have long been committed to engaging with companies around issues that negatively impact the poor and God’s creation. The pace of change across the oil and gas sector has been inadequate and we welcome the recommendation of JACEI to disinvest.”
For all press queries related to Epworth please contact:
Jason Ochere and Alasdair Lennon
epworth-maitland@maitland.co.uk
Tel: 44 (0) 207 379 5151
Andrew joins in the newly created role and will be responsible for all matters related to the ethical thought leadership and ethical performance at Epworth.
“Some ‘responsible’ investors are undertaking tax acrobatics to avoid paying their fair share of tax.” David Palmer, Chief Executive Officer
2020 has witnessed the acceleration of a number of major societal changes – the shift to e-commerce, remote working, and the transition to a lower carbon economy, to name a few.
The acceleration of these trends has, in part, been caused by Covid-19 with the lockdown providing the opportunity to reflect and ask the question ‘do we want to go back to how things were?’
This can be seen on a micro-level with surveys suggesting 40% of finance professionals and 70% of IT professionals are seeking a career change in 2021.
In the City of London, this has been evident through the very loud embracing of ESG, CSR and ‘stakeholder capitalism’ by institutions and investors alike.
We’ve all seen this in its various shapes and forms – a cuddly advert filmed over Zoom; a CSR initiative to feed/clothe/entertain key workers; or a cash donation to a charity stepping into a gap left by a government spending cut.
The City’s progress on ESG should be celebrated, but it needs to go further and, collectively, the City needs to achieve more.
The excuses, that were previously fed to savers to fob-off concerns around investing in weapons, tobacco, and fossil fuel exploration, are no longer working.
You can no longer tell a millennial or a member of Generation Z that the high barriers to entry and the stable income of weapon-manufacturing stocks mean that its therefore worth ignoring the fact that weapons platforms kill people, mostly civilians.
Those lines won’t work. If you try, you’ll find your young clients will download an app and have their money invested in green ETFs before the week’s end.
Our future customers will decide which of us continue operating and they’re only becoming more empowered thanks to advances in technology, the information available, and regulation.
So, it must be asked, will the tolerance of generations’ that graduated into the 2008 and Covid-19 recessions wear thin, when they learn that their newly carbon-neutral pension manager invests in companies that undertake tax acrobatics to avoid paying their fair share of tax, which is needed now more than ever?
If you think we’re exaggerating, here’s a sad fact: there’s only one asset manager in the UK with the Fair Tax Mark.
That’s clearly not good enough and not sustainable for any of us.
The true scale of this insidious problem remains unclear thanks to the secrecy and complexity with which these arrangements are made by London’s leading accountancy and law firms.
The UK government’s official estimate for how much tax is avoided is £36bn. Whereas, independent experts from Tax Research have suggested it’s as much as £116bn. To give you some idea of how transformative that money would be for the UK, our public spending for health and the NHS in 2020-21 is £178bn.
It’s only a matter of time before the public look even more dimly on firms with tax addresses in countries where they have very little activity while they pay a pitiful amount of tax in countries where they source billions of revenue.
You only have to look at public frustration surrounding the tax arrangements of leading Brexiteers Sir James Dyson and Sir Jim Ratcliffe, who have relocated their homes and businesses to Singapore and Monaco respectively, to understand how this might play out in the court of public opinion.
The old excuses that were once fed to clients on this issue are similarly losing their potency.
People are tired of hearing how many hospitals could be built if schemes like the Double Irish with the Dutch Sandwich weren’t exploited by the world’s largest tech firms.
Moreover, these firms, including Amazon, are set to be some of the largest beneficiaries of the lockdown-led boom in e-commerce. Due to the desperation in today’s society, they have been able to recruit newly laid-off workers by the thousands, but have declined to offer them sick or holiday pay.
There is real anger that companies in receipt of taxpayer money are using it to pay dividends or support executive pay, while countless families live in fear of the furlough scheme ending.
This year, the power of the public to bring about change has never been more evident and so underestimated.
That power, which has brought out the best in humanity in 2020, will continue to find its way into City boardrooms in which the question will be asked: ‘Are you paying your fair share?’
Reproduced with kind permission of ESG Clarity
Epworth Investment Management, which has in excess of £1.2bn of assets under management, has today (21st September) secured its first Fair Tax Mark certification, and joins the growing movement of responsible businesses who ‘say what they pay with pride’.
Epworth Investment Management is an investment manager dedicated to serving the needs of Churches and Charities. They are stewards of their investors’ money and carefully select investments using Christian ethical criteria. Epworth is wholly owned by the Central Finance Board of the Methodist Church, which was founded in 1960.
The Fair Tax Mark is an independent certification, which recognises organisations that demonstrate they are paying the right amount of corporation tax in the right place, at the right time. More than 50 businesses have now been certified. These include national brands such as Timpson, Lush, and Richer Sounds, FTSE listed companies including SSE and Marshalls Plc., as well as co-operatives, family businesses and social enterprises.
Epworth Investment Management has developed a clear responsible tax policy and is committed to transparency. This includes being open regarding its lobbying on taxation matters and foregoing influencing governmental tax legislation in any way that is detrimental to its stakeholders’ best interests. They are also at the leading edge, globally, of engagement with investees on responsible tax conduct.
David Palmer, Chief Executive, commented:
“Responsible investing is at the heart of what we do, and I am pleased to say that Epworth Investment Management has taken all of the necessary steps to ensure it is responsible and transparent on tax. We will not stop there however. We are committed to the Fair Tax Mark, and shall encourage our investee companies to secure this certification as well”.
Paul Monaghan, Chief Executive, Fair Tax Mark, said:
“We are delighted to announce that Epworth Investment Management is the first fund manager in the UK to achieve the Fair Tax Mark. They are walking the talk and have thrown the gauntlet down to other asset managers, in terms of both operational conduct and securing change among investees.”
“Institutional investors and asset managers have, to date, been somewhat cautious on the issue of tax justice, in comparison with their vigorous work in the areas of climate change and human rights. So it’s great to see Epworth Investment Management setting a benchmark for what meaningful action can look like.”
Justin Thacker, Director, Church Action for Tax Justice, said:
“John Wesley, the founder of Methodism, famously encouraged us to gain all we can – but then added ‘without hurting our neighbour’, without ‘ruining his trade’. In making the decision to comply with the requirements of the Fair Tax Mark, Epworth Investment Management are truly honouring their Methodist foundations. They are demonstrating that it is not just possible, but also valuable, to combine effective investment practices with a Christian ethical base, and have forged a path for other Christian investment institutions to follow.”
Polling* commissioned by the Fair Tax Mark from ICM has recently found record levels of post-covid concern among the public about the use of tax avoidance practices by business in the UK. Over three-quarters of people responded said that they would rather shop with (79%) or work for (82%) a business that can prove it is paying its fair share of tax. Eight in ten people (82%) believe businesses benefiting from Government bailouts should be forced to agree terms that prohibit tax avoidance and enforce responsible tax conduct.
* 2020 ICM Omnibus: a nationally representative omnibus survey of c.2,000 adults across GB between 15th and 17th May 2020.
ENDS
For media enquiries please contact: 07741 988492 / press@fairtaxmark. Images available
NOTES TO EDITORS:
The Fair Tax Mark certification scheme was launched in February 2014 and seeks to encourage and recognise organisations that pay the right amount of corporation tax at the right time and in the right place. Tax contributions are a key part of the wider social and economic contribution made by business, helping the communities in which they operate to deliver valuable public services and build the infrastructure that paves the way for growth. More than fifty businesses have now been certified, including FTSE-listed PLCs, co-operatives, social enterprises and large private business – which between them have over 7,000 offices and outlets. A suite of global accreditation standards will be rolled out in 2021. We operate as a not-for-profit social enterprise and believe that companies paying tax responsibly should be celebrated, and any race to the bottom resisted. Other initiatives include Fair Tax Week and the Councils for Fair Tax Declaration. https://fairtaxmark.net
“The Epworth Climate Stewardship Fund tackles the climate emergency head-on, letting UK charity trustees invest in a way that will help save the planet while targeting good long term investment returns.” David Palmer, Chief Executive Officer
Epworth Investment Management Limited (Epworth), the UK investment manager dedicated to serving the needs of charities, today announces the launch of the Epworth Climate Stewardship Fund (‘the Fund’). It invests in a way that will help UK charities both save the planet and target above market returns over the long term.
Created in response to the climate emergency, the Fund has been developed in partnership with UK charities.
Climate change has been at the core of Epworth’s investment approach for over 10 years. We engage with companies in all sectors to push for better action on reducing carbon emissions and we avoid investment in the worst offenders. This Fund is the evolution of this process, accepting that we are now in a climate emergency and that charities want to take greater steps to ensure they are investing in a way that will benefit the planet.
The Fund aims to have a carbon footprint substantially below that of the FTSE All Share Index. It will invest with Christian ethics, seeking out companies that contribute to the transition to a lower carbon economy and engaging with portfolio companies to encourage action that reduces the risk of climate change. It will exclude companies that extract or refine fossil fuels, those companies that have material involvement in supplying them with goods or services as well as those that do not meet our bespoke Christian ethical screening process.
The Fund will seek income and capital growth over a minimum 5 year period through investing mainly in UK companies.
“Covid 19 has shown everyone just how quickly the world can change – and the sudden damage and disruption that can be caused to day-to-day life. It is rightly everyone’s immediate concern – but climate change remains the biggest long-term threat to our planet. The pandemic response also shows that rapid radical action in response to an existential threat is possible. That gives us hope for action on climate change.
The Epworth Climate Stewardship Fund tackles the climate emergency head-on, letting UK charity trustees invest in a way that will help save the planet while targeting good long term investment returns.”
Andy Donald or Jason Ochere
epworth-maitland@maitland.co.uk
Tel: 020 7379 5151