Ethical Investment Review June 2019

Climate change

Climate change continues to be one of the main areas of our ethical work. We co-filed a shareholder resolution at BP’s AGM, calling on the company to explain how it will align with the Paris Agreement. The resolution secured the BP board’s backing and was passed with 99.47% of votes. We also supported a resolution organised by the activist group ‘Follow This’ calling on BP to go further, including publishing Scope 3 emissions targets; unfortunately, this only secured the backing of 8.35% of investors.

We attended the Anglo American AGM, where we made a statement on behalf of the Climate 100+ investor coalition; we co-lead on engagement with Anglo American. This is part of an ongoing dialogue being lead by the CFB and Hermes in regard to Anglo American’s transition to a low carbon economy. This involves biannual meetings with the company to raise issues related to climate change, including climate linked remuneration, scope 3 emissions, and the reduction of coal mining. We look forward to the next meeting with Anglo American.

We continue to work on our project to evaluate the consistency fossil fuel companies’ business models with the Paris Agreement. We remain on track to draw final conclusions in 2020. With the launch of the new Global Equity Fund for Charities, we had to undertake an interim judgement on a number of global oil companies and decided that some would be highly unlikely to meet the criteria and so excluded Chevron, ConocoPhillips and ExxonMobil from investment.

We have already excluded several other fossil fuel producers under our existing policies and it is likely we will exclude further companies in future. However, we are aware that some clients want to move faster so we are consulting on the potential for launching a fund which excludes all companies with significant involvement in fossil fuel extraction.

The approach banks have been taking with their lending policies and climate change has been another area of focus. We have engaged directly with the Canadian banks to which we have exposure with respect to their lending to companies involved in tar sands projects, and found their responses to be disappointing. We are reflecting on the next steps. We have also joined other investors in writing letters to Barclays and Unicredit regarding their lending to fossil fuel projects.


The tailings dam disaster near Brumadinho in Brazil earlier this year remains very much in the minds of investors. We are part of an investor coalition organised by the Church of England which engages with mining companies on their tailing dams. This initiative has seen letters sent to 651 listed mining companies, in order to create a global register of tailings storage facilities. This is designed to raise awareness of the tailings facilities that the company owns or operates in order to see which company has responsibility for the facilities, and the scale of the risks that it faces.  As of 5 July 2019, 31% of companies contacted have responded, and we were pleased to see that included 34 of the top 50 mining companies. We continue to be active in this coalition.

The Mining and Faith Reflections Initiative (MFRI), of which we are part, organised a conference in the Vatican on Mining and the Common Good. Delegates included church, NGO, and local community representatives along with mining CEOs and other executives.

Tea & workers’ rights

We have been engaging with tea producers for some time, recognising the abuses that can take place within the sector. We wrote to Unilever to ask for greater transparency on the estates from which it sources tea and requesting this to be disclosed publically. We were pleased to receive a response from Unilever, which confirmed that the company will now publish the tea estates it sources its UK and Ireland tea from on its webpage.

Israel Palestine

We continue to monitor investment issues with respect to Israel Palestine, applying our dedicated policy. We had engaged for some time with Heidelberg Cement; however for unconnected reasons our funds no longer hold shares in this company.

Living Wage

As part of our work with ShareAction, we engaged with Reckitt Benckiser and Intercontinental Hotels Group in June to encourage both companies to become Living Wage accredited.  We look forward to hearing their responses in due course.


We have continued to engage with companies on the issue of plastic pollution. We contacted Ted Baker about the use of plastic micro fibres used in the clothing industry. These can end up in oceans. In its response, Ted Baker highlighted its commitment to using sustainable fibres where possible and it noted that natural fibres can also have negative impacts from the use of natural resources such as water. We co-signed a letter to 50 global consumer goods companies organised by As You Sow, an American NGO, encouraging them to complete a survey on plastic packaging, to allow an assessment of their approaches.

Principles for Responsible Investment

The PRI annually undertakes an assessment of its members’ approaches and activities with respect to responsible investment. We achieved A+ ratings for our overall ESG strategy and governance, A+ for our approach with indirect holdings, A+ for our incorporation of ethics into our management of our equity holdings, and As for active equity and corporate bond ownership.

Corporate governance

Q2 was a busy quarter for voting with many companies holding their AGMs. Our voting policies resulted in voting against three quarters of remuneration reports in the UK, in many cases because of excess levels of remuneration. We oppose the election of directors where policies or outcomes on remuneration, board diversity, tax transparency, climate change or corporate governance are particularly poor. This resulted in opposing 14% of directors in the quarter. Our voting policies are applied to all of our holdings in the new Global Equity Fund as well as our UK Funds.

Ethical Investment Review March 2019

Climate change

Our work evaluating fossil fuel companies’ alignment with the Paris Agreement has made considerable progress. We are assessing the extent to which the business plans of these companies are aligned with ‘well below 2C’. Our project looks at companies’ current asset mix, capital expenditure plans, climate strategy & governance, transition plan and direct emissions. We have developed methodologies for all five assessment areas and have begun to apply them to companies. Overall, we are examining 29 metrics on each company. Our next steps are to refine our approach and engage with the companies we are assessing.

We continue to be active in investor coalitions such as Climate 100+. This includes co-filing a shareholder resolution at the BP AGM later this year, calling on the company to outline how it will align with the Paris Agreement.


In January a tailings dam near Brumadinho, Minas Gerais, in Brazil, collapsed, almost certainly killing over 300 people. The mining company responsible for the dam was Vale, which had operated the Samarco dam which collapsed in November 2015. Our portfolios did not hold Vale but the disaster highlighted the risks associated with such tailings dams.

We are part of an investor coalition organised by the Church of England to put pressure on mining companies to reveal more information about their use of tailings dams and to adopt independent standards. We participated in an investor roundtable in March with investors and mining companies. We have been encouraged by the acknowledgement of some leading mining companies of the need for change and have been engaging on this issue with companies held in our portfolios. We are working to encourage disclosure from mining companies on their exposure to tailings dams as there is very little information available and the risks to life are considerable. We will be working as part of the coalition on engagement around the tailings issues.

We continue our work helping church and mining leaders discuss what mining for the common good means in practice, especially for communities directly affected. The Methodist Church, Church of England, and the Vatican continue to explore ways we can share perspectives and engage with mining companies.

Pooled investment funds

Investment in pooled investment funds, also known as collective investment schemes, raises some challenges for ethical investors. Pooled funds are used to provide access to specific asset classes, thematic investments or strategies that could not otherwise be accessed cost effectively or in the appropriate size without a heightened risk of liquidity becoming unbalanced. However, there can be a risk that owning stakes in such funds can indirectly expose portfolios to business activities and companies that would otherwise be excluded on ethical grounds. This is similar to owning shares in a large company with a small division involved in activities which would disqualify it from investment were it the main business.

On JACEI recommendation, we have published a policy on investment in pooled funds. The policy acknowledges the advantages of pooled funds when specialist expertise or geographical exposure is required. We will seek pooled funds with a similar ethical investment approach to our own where possible and we will engage with the fund managers. We will avoid pooled funds with significant exposure to companies in which we would avoid direct investment. The policy is available on our website.

Israel Palestine

Continuing the long running engagement that we have had with Heidelberg Cement regarding a quarry in the West Bank, the company has told us that the quarry is to be sold to a private party, and that production at the site has ceased.

Living Wage

We engaged with BT Group last year to encourage it to become Living Wage Accredited. We continued engagement through to February 2019, when it became clear that the company would not become accredited, which was disappointing. We will continue to monitor this situation, and will engage again in the future. The engagement was part of a larger effort, where we encouraged seven companies to become Living Wage accredited. We continue to work with ShareAction on this issue.

Worker rights

Our letter to the Chairman of Ted Baker, a clothing retailer, following allegations of inappropriate behaviour in the workplace, received some publicity. The CEO later voluntarily suspended himself from duties and in March the company announced that he had resigned.

Farm animal welfare

In collaboration with FAIRR, we joined other investors engaging with Whitbread regarding antibiotic use in its supply chain. Although Whitbread has now sold its Costa Coffee division, it still owns other restaurants and food outlets. Questions were asked around the development of targets and a timeline for implementation to encourage suppliers to report the quantity and type of antibiotics used in different species of animal. There was also a detailed discussion around the audits that take place with regard to animal welfare. Whitbread was forthcoming on the subject and we look for progress during the year.

Stewardship Code

Our 2019 Stewardship Code Statement is now available. Our Statement continues to be rated Tier 1. In future the Code is expected to place more emphasis on environmental, social, and governance considerations.

Corporate governance

In association with other Church Investors Group members we revised our voting template in time for the 2019 voting season. The standards we expect on remuneration and boardroom gender diversity remain high and we made some small adjustments this year. We extended the boardroom diversity requirement beyond the UK where possible and we added an element on tax transparency.

There were relatively few company meetings this quarter. Full voting reports are available and a summary is published online.

Ethical Investment Review December 2018

Climate change

We have been engaging in considerable work to evaluate the extent to which the operations of fossil fuel producers are consistent with the Paris accord. This involves five pieces of analysis: companies’ current asset mix, capital expenditure plans, climate strategy & governance, transition plan and direct emissions. JACEI reviewed the first fruits of this work in December when it considered papers on Asset Mix Methodology and assessments of companies’ asset mix. Further work will be presented to JACEI in the spring.

The IPCC produced a report on limiting climate change to 1.5 °C and this will feed into our work, as will our involvement with IIGCC, TPI, Carbon Tracker and the CA100+ initiative during the quarter. Our Montréal Pledge disclosure for 2018 has been published online.

We signed a collaborative investor statement to support a Just Transition on Climate Change.

We wrote to the large Canadian banks to which we lend through our Deposit Fund: Bank of Montréal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada and Toronto Dominion. The engagement was as a result of analysis which showed that these banks lent substantial amounts to the tar sands industry. We have asked each company to join the TCFD initiative, and to explain how their tar sands finances is consistent with their climate change policies.

Extractive industries

We attended a sustainability day hosted by BHP Billiton led by senior personnel. The company is progressing compensation and resettlement following the Samarco disaster, and updates on climate change emissions targets and health & safety were discussed.

We wrote to Nutrien which sources phosphate from disputed Western Sahara, and has thus been excluded from investment. The company was able to provide assurances that following a review, the company would be self-sufficient in North American phosphate from early 2019, thereby ceasing to source from Western Sahara.


We contacted AB Foods, Tesco and Ted Baker regarding the presence of micro-fibres in clothing ranges. Tesco replied encouragingly, stating they are working with suppliers to understand the science and have part-funded a pan-industry initiative ‘Industry Action on Micro-fibres’ to drive a coordinated response. As part of our ongoing engagement with a range of companies on plastics, we are now focussing on the risks arising from micro-fibres and their long-term impact on the marine environment.

Living Wage

We engaged with Vodafone Group to encourage them to become an accredited Living Wage employer. We were disappointed that they declined, despite stating they are committed to paying all employees the Living Wage. Accreditation requires full time employees and third party contractors to be paid the voluntary enhanced rate, and Vodafone expressed an inability to ‘track’ third party reward structures. We are now working with Share Action and the Living Wage Foundation to re-engage Vodafone in discussion.

Worker rights

Ted Baker, a clothing retailer, faced allegations of inappropriate behaviour in the workplace. The company has appointed a committee of non-executive directors to review the allegations as well as an external law firm to lead an inquiry. We wrote to the Chairman to express our concern, ask when the inquiry was expected to be concluded, and to call for a commitment to implement any recommendations promptly.

Farm animal welfare

We are signatory supporters to the Business Benchmark on Farm Animal Welfare (BBFAW) which ranks food manufacturing and processing companies for welfare risk. Cranswick has been ranked as a Tier I leader, and we wrote to the company welcoming its strong stance on animal welfare and asking the company to support a new Global Coalition for Animal Welfare spearheaded by Nestlé and Unilever. A response is awaited.

Business ethics

We divested our shares in Danske Bank following the allegations that it allowed €200bn of potentially laundered money flow through its Estonian branch, and removed the bank from the list of banks to which we will lend through our Deposit Fund. The scandal resulted in both the Chair and Chief Executive being dismissed. We reviewed the currently available information about the scandal, its systemic nature and the alleged culpability of senior executives and decided to divest from the Bank as a shareholder and to cease its suitability as an approved lender.

Corporate governance & executive remuneration

The December quarter was very quiet. During the quarter we voted at four UK meetings opposing five resolutions; three against the re-election of directors and two against executive pay: MJ Gleeson and AB Foods. We wrote to Eco Animal Health regarding the company’s irregular governance arrangements and were pleased to learn at a subsequent meeting with the Executive Chair, that the Board had agreed moves to improve governance practice.

In Europe, we voted at seven meetings, and took action in 14% of cases. Re-election of directors and opposing the Financial Report & Accounts on climate change grounds were the main issues of contention.

In 2018 as a whole, we voted in total at 93 meetings in the UK comprising 1,537 resolutions, opposing or abstaining 17% of proposals. Remuneration accounted for 30% of all action taken in the UK and the re-election of directors 56%. Of 96 remuneration proposals (reports and policies) in 2018, we opposed or abstained 86%. In Europe we voted at 234 meetings comprising 3,785 resolutions. We opposed or abstained 21% of all proposals, with the re-election of directors accounting for 37% of action, and executive pay 42%. Just under 60% of all remuneration proposals in Europe were opposed.

Our full voting reports are available on request, whilst a summary is published online.

Ethical Investment Review September 2018

Climate change

We once again asked Trucost to provide a carbon footprint assessment of our UK portfolio, which we first commissioned in 2009. According to their analysis, the UK Equity Fund’s carbon footprint amounted to 288 tonnes of CO2 per million pounds of market capitalisation. The carbon intensity of the Fund has fallen by 3.4% pa since 2009. The gap between the Fund and the Index (FTSE All Share) has narrowed since 2009, which indicates the level of improvement in the market overall towards greater decarbonisation.

We are members of IIGCC (Institutional Investors Group on Climate Change) and actively participate in public policy initiatives in a collaborative way. During the quarter we supported an IIGCC led campaign lobbying MEPs to adopt an ambitious approach to reducing car and van engine emissions including a target of at least 40% CO2 emissions reduction by 2030.

We attended and took part in a series of meetings on climate change including the TPI (Transition Pathway Initiative) and a conference call with Royal Dutch Shell. We co-signed a letter that appeared in the Financial Times encouraging the corporate sector to accelerate the transition towards a low-carbon economy.

We are continuing our considerable work preparing a detailed reassessment of fossil fuel companies in the light of the Paris Agreement. Scoping such a systematic approach is taking time, but our detailed work will ultimately provide a robust means of looking at fossil fuel companies from the perspective of the transition to a low carbon economy.


We have devoted some time over the summer to researching the issue of plastics and our investments’ exposure in greater depth. We will be engaging with companies over the winter months, and are considering to joining As You Sow, an investor coalition focussed on plastics.

Principles of Responsible Investment (PRI)

Principles of Responsible Investment conducts an annual assessment of how asset managers consider issues relating to responsible investment. We have once again achieved top ratings cross the major modules including receiving A+ in the overarching Strategy & Governance section and in how we incorporate our ethical approach into our equity portfolios.

Human and labour rights

We contacted Compass Group following reports that one of its subsidiary companies contracted to the All England Lawn Tennis Championships had allegedly been paying employees insufficiently, including not being paid an agreed night shift rate. The company has robustly denied the allegations and provided a response asserting that all rates were agreed and were at levels above the National Living Wage. Some of these roles subsequently attracted further wage uplifts.

We contacted the UK arm of French hotels group Accor owing to the absence of a Modern Slavery Statement on its UK website. All companies with revenues greater than £36m and operating in the UK are required to publish a Statement. Correspondence with the company produced a comprehensive Statement, however we have continued in dialogue as this was not signed by a director and has not been uploaded to the Accor UK website.

Living Wage

Working once again with Share Action, we have led a further round of engagement with seven companies pressuring them to seek accreditation to the Living Wage. The response from Berkeley Group was encouraging as the company is a Living Wage employer across its own directly employed staff. BT Group has taken steps to ensure reward is targeted at or above Living Wage levels, but does not wish to be ‘constrained’ by accreditation. Reckitt Benckiser Group also provided an encouraging response, suggesting it pays all UK employees the Living Wage with this extending to contractors.

We also challenged IHG Group, which as part of being made a preferred partner to the London Olympics in 2012, had agreed to accredit to the Living Wage. The company has reneged on this commitment, but justified this to us as due to the ‘rapidly changing environment’ including introduction of the National Living Wage. This was disappointing and we continue in dialogue with the company around its commitments.

Farm animal welfare

We supported a collaborative FAIRR (Farm Animal Investment Risk & Return) initiative focused on reducing antibiotic use in the food chain. An investor letter was sent to Whitbread seeking more information from the company on how it manages antibiotic use in respect of its supply chain.

Corporate governance & executive remuneration

The September quarter traditionally marks the end of the voting season in the UK and Europe. During the quarter we voted at 17 UK meetings opposing or abstaining 17% of resolutions. Action was taken in the main against executive remuneration and the re-election of Board directors. Remuneration was opposed at BT Group, Burberry, Experian, Vodafone and National Grid Group among others.

Diversity has been fully integrated into our UK voting policy. Since 2017 the percentage of women on FTSE Boards has increased from 27.7% to just over 30%, however at executive level progress remains slow. We oppose the re-election of Nomination Committee Chairs where progress to improve Board diversity remains poor. During the quarter, directors were opposed at BT Group (four directors), SSE (four directors), Experian, Cranswick and DS Smith.

In Europe, we voted at eight meetings, and took action in 35% of cases, where re-election of directors and executive pay were the main issues of contention.

Our proxy voting partner, ISS, votes our shares in accordance with an agreed CIG policy, which is reviewed and approved by the members annually. Our full voting reports are available on request, whilst a summary is published online.

Ethical Investment Review June 2018

Climate change

We are working on applying our recently agreed climate change methodology to our fossil fuel company shareholdings. Our first task is to critically examine the data and analysis available for each of the five criteria we are using to assess companies. Our intention is to complete preliminary assessments of four companies (BP, Equinor, Royal Dutch Shell, Total) by the turn of the year. These will be subjected to a lengthy review process and we will also engage with the companies. At the same time, we expect further climate change scenarios to be published, which we will need to factor into our work.

Climate change remains at the forefront of our work and we are active in several initiatives, including attending an IIGCC meeting where we heard from Patricia Espinosa, the Executive Secretary to the UNFCCC (UN Framework Convention on Climate Change) ; We have signed an IIGCC Investor Statement to the G7 and a supporting letter published in the Financial Times. We continue to play an active part in the Transition Pathway Initiative (TPI).

We voted to support the shareholder resolution at Royal Dutch Shell brought by ‘Follow This’, a Dutch NGO. The resolution called on Shell to set and publish targets for reducing GHG emissions aligned with the Paris Agreement, with such targets including Scope I, II & III emissions. The resolution attracted around 5.5% support, with Shell arguing its published Scope III emissions ambitions represented sufficient progress.


Concern about the impact of plastic waste on the environment and in the oceans is concentrating investor attention. We have joined a collaborative initiative called the ‘Plastic Solutions Investor Alliance’ which intends to engage actively on plastic pollution and on the design and sustainability of plastic packaging. The Alliance is planning focused engagement in the UK with food retailers and consumer staples groups on reducing exposure to plastic waste and making waste streams more environmentally sustainable. It is encouraging that over 40 companies, including Tesco, Unilever and Nestlé have signed up to the UK Plastic Pact initiated by WRAP (Waste & Resources Action Programme) which has four ambitious targets including 100% plastic packaging to be reusable, recyclable or compostable by 2025.


On behalf of the Church Investors Group (CIG) we have now completed our initial engagement work on water stewardship. Using the CDP water survey, we engaged with nineteen UK and European companies to encourage greater governance, disclosure and oversight of systemic water risk. Sixteen companies responded with positive outcomes, four expect to contribute to the CDP survey in future, and a further four are actively reviewing participation. Five companies provided detailed responses on their own water management programmes. We will now review the results with CIG.

Human and labour rights

We received responses from Unilever and Associated British Foods to our concerns around labour conditions on tea plantations. These remain an acutely complex socio-cultural challenge, and one in which we have engaged in the past. Unilever’s priorities are housing and sanitation in Assam and it assured us that it is ‘driving the industry to make time-bound improvements’. AB Foods (via its subsidiary Twinings) is also leading a step-change by ‘introducing a new framework to evaluate human rights risk’. We are encouraged that parts of the industry is showing commitment to improving the lives of estate workers, and we will continue to engage pro-actively for change, albeit this remains one of the more intractable challenges for investors.

Mining and Faith Reflections Initiative

We remain actively committed to the ecumenical process known as the Mining and Faith Reflections Initiative. The churches have led fruitful conversations with mining executives over time, and are now reflecting on potential next steps that support mutually beneficial dialogue between the churches and the mining sector, and which will include shared theological principles for engagement.

Farm animal welfare

During the quarter we formally joined a new partnership with FAIRR (Farm Animal Investment Risk & Return). FAIRR has led investor efforts that draw attention to the overuse of antibiotics in the farm animal supply chain, and which we have supported. FAIRR is also leading new research and engagement into the effects of protein and animal husbandry on climate change. We expect to work with FAIRR as they develop collaborative efforts around other relevant farm animal issues.

Executive remuneration

The June quarter traditionally marks the peak of the voting season in the UK and Europe. 2018 has been relatively quiet with few major pay revolts. However, the Investment Association has noted a sharp increase in shareholder protest more generally and in particular against the re-election of directors incurring 20% or more opposition. In the second quarter we opposed the re-election of 228 UK directors or 19% of the total.

We remain focused on opposing excessive executive pay but we have also strengthened our approach towards workplace fairness, boardroom diversity and climate change. Where boards have insufficient gender diversity we routinely vote against Nomination Committee chairs. Instances this quarter included Rio Tinto, BP, Smith & Nephew, WPP, Anglo American, Standard Chartered, Centrica and London Stock Exchange Group.

During the quarter we voted at 62 UK meetings, opposing or abstaining 16% of resolutions. We opposed over 60% of votes on remuneration policies and reports. In Europe, we voted at 187 meetings, and took action in 21% of cases, where re-election of directors and executive pay were the main issues of contention.

Ethical Investment Review March 2018

Climate change

We have been focused this quarter on our climate change project. We are focussed on determining the extent to which fossil fuel company business investment plans comply with the Paris Agreement to keep the average rise in temperature to “well below 2C”. We already exclude a number of companies on climate change grounds under our three existing climate change policies. We have now developed a methodology for analysing companies.

For temperature rises to be limited, levels of coal, oil and gas consumption will have to be considerably lower than today, even though some fossil fuel use will continue up to and beyond 2050.

Our methodology, recently agreed, will include examining:

  • The current asset mix of extractives
  • Capital expenditure on exploration and production
  • Climate strategy and governance
  • Positive steps taken towards transition, and
  • Decreasing direct emissions

It will take some time to evaluate our existing holdings using this approach to our direct holdings and we will conduct an extensive round of engagement as we do so. We will assess new climate change scenarios and company data as they are published. Royal Dutch Shell has recently published data on its Scope 3 emissions (emissions from use of its products) and ‘ambitions’ for reducing them.

As founding members of the Transition Pathway Initiative we have welcomed the TPI’s developing thinking and planned updates on sector analysis for oil, gas, and electric utilities.

The financial sector has an important role to play in terms of business commitment to financing the transition to a low carbon economy. We have therefore begun to consider the role banks play in their lending decisions and to what extent these are consistent with the transition to a well below 2C world.

Fixed interest policy

We apply our Christian approach to ethical investment to all asset classes. However, bonds and equities differ with respect to the types of instruments in which we might invest and their issuance. We now have a policy for this area to guide us through the nuances of applying our overall approach to this asset class. The Policy sets out how we address ethical challenges when investing in Gilts (government debt), supranational, sub sovereign, agency, and corporate bonds. The new Policy is available on our website.

Human and labour rights

Supply chain risks dominate in terms of the potential for complicity in human rights violations. We contacted Berkeley Group following reports of child labour in the Indian granite market. The company confirmed it sources no granite from the regions at risk in India, and has comprehensive supply chain mapping in place to manage potential risks arising from child, forced or bonded labour. We have also written to Associated British Foods and Unilever to ask how they assess labour and human rights conditions on Assam tea estates. Labour conditions in particular appear to have deteriorated since our last round of engagement with wages among the lowest in India and allegedly falling below the State minimum. This remains a complex socio-cultural challenge.

Tax justice

The payment of tax is an important corporate responsibility. It is important therefore that companies are transparent about how they pay tax and how they arrange their affairs to minimise tax payments. We have been working alongside the wider Methodist Church on this issue and have now published a policy on tax justice. We have focused on Biblical principles, current issues around fair tax, recent activity and the approach to engagement with companies. We have published our thinking on tax in a Position Paper, and the new Policy, on our website.


Plastic waste can substantially damage the environment and urgent action is required across different sectors. We are looking at how companies tackle the issues around plastic waste. Our focus is on single-use plastic (bottles, cups, straws etc.) where these are seldom recycled, and micro-plastics (used in cosmetics and cleaning products). Further analysis will focus on key companies, looking at their policies and processes for reducing plastic use and how they work with packaging companies in terms of innovation and design.


Our annual in-depth meeting with Nestlé UK took place during the quarter. We received updates on BMS (breast milk substitutes) issues, human rights in the cocoa and coffee supply chains, Nestlé’s response to the debate on single use disposable plastic, Modern Slavery, and health & safety across its global operations.

Extractive industries

We continue to be active participants in the Mining and Faith Reflections Initiative and attended two half-day meetings facilitated by Anglo American. These debated the role of mining in development and also heard a NGO perspective on the role mining can play in local communities. We continue to work ecumenically with church denominations on developing common ground in our approach to mining.

Executive remuneration

Prior to the beginning of the peak voting season in the UK we published our 2018 UK Stewardship Code Statement. We have been rated ‘Tier I’ by the FRC (Financial Reporting Council) in recognition of our commitment to transparency. The Statement is available on the website.

Our new voting policy, developed with the Church Investors Group, was launched during the quarter. We remain focused on executive pay but have ratcheted up our approach towards workplace fairness, boardroom gender diversity, and climate change. Where boards are less than 25% female, we will vote against the chairs of the Nomination Committee.

We wrote to the Chairman of housebuilder Persimmon which has been heavily criticised for an executive incentive scheme that has delivered excessively. The Chairman had resigned over the scandal, recognising the Scheme had been poorly designed. We sought assurances that the scale of awards would be reduced and that a moratorium on future pay-outs be imposed pending a review.

Ethical Investment Review December 2017

Farm animal welfare

We have launched a new policy on farm animal welfare. The policy outlines how we will engage with food producers and processors, hospitality, and food retail companies that use animal related products. We have been a long-standing supporter of the Business Benchmark on Farm Animal Welfare (BBFAW) and our policy supports strong corporate disclosure around the way farm animal welfare issues are managed. We have published the policy alongside a position paper on our website. During the quarter we became an investor signatory to a global investor statement on antibiotic use facilitated by FAIRR (Farm Animal Investment Risk and Return).

Climate change

Our project to re-evaluate fossil fuel companies continues apace. We already exclude a number of such companies on climate change grounds under our three existing climate change policies. Where we have holdings in the sector we engage extensively. Our new project, accelerated after a Methodist Conference motion in the summer, will examine how well companies are aligned with the Paris Agreement. The agreement aims at keeping the average temperature rise to “well below 2C”.

The task is not straightforward and while we are collaborating with other investors where we can, we have not encountered any other investment institution undertaking the same analysis. For temperature rises to be limited, levels of coal, oil and gas consumption will have to be considerably lower than today. However, most scenarios outline a period of transition and some fossil fuels will still be used.

We have reviewed a range of climate change scenarios and more closely examined a shortlist of scenarios which have particular relevance. The next step will be to develop a methodology for assessing companies. Our first take on this will be discussed by JACEI in the first quarter of 2018.

We continue to keep abreast of industry thinking, especially through our membership of the IIGCC and the Transition Pathway Initiative.

We attended a presentation by Shell in November, which emphasised the management’s interest in building a portfolio of technologies including biofuels and hydrogen. Shell confirmed it will progressively provide more information on its transition to a low carbon future and it has begun to produce ‘Scope 3’ information on the use of its products.

Labour rights

During the quarter we became signatory members of the Workplace Disclosure Initiative. Investors have often been slow to recognise responsible investment issues associated with the workplace such as the growing pressure from low wages, the gig economy and automation. We have long engaged with business on the adoption of the Living Wage and this new initiative, led by Share Action, aims to secure improved disclosure on workforce reporting, modelled on initiatives such as the CDP. The Workforce Disclosure Initiative will target the FTSE50 and seek to enhance investor insight into a range of employment issues.

Human rights and conflict

The deteriorating situation in Rakhine State, Burma, has resulted in very significant human rights violations carried out against the Rohingya minority. We engaged with Telenor as the contracted company responsible for rolling out the mobile telecom network across Burma to understand the impact of the conflict on its operations and how it has responded. The company has provided comprehensive information on its human rights due diligence and confirmed it has no agreements “commercial or otherwise” with the Burmese military.


In November we engaged with 19 selected UK and European companies on water issues on behalf of the Church Investors Group (CIG). We have begun to assess responses to this engagement as we seek to improve companies’ risk management and measuring.


We participated in a roundtable on tax convened by the Joint Public Issues Team of the Methodist Church, United Reformed Church, and Baptist Union in October that brought together delegates from interested stakeholders including the Methodist Tax Justice Network. We are working on formalising a policy on tax. Tax is a particularly complex and technical issue for investors to engage with and the Policy will set out a methodology for effective engagement on transparency and disclosure.

Extractives industries

We continue to be active participants in the Mining Faith Reflections Initiative and attended a roundtable meeting held in November at Lambeth Palace. We value the role we play in helping to bring together the three facilitating denominations; Roman Catholic, Church of England and Methodist, and help them witness to the need for mining companies to pursue the common good.

Corporate governance & engagement

We launched a Screening and Engagement Policy during the quarter. This sets out, in high level terms, our overall approach to assessing and engaging with companies. It explains why we regard engagement as important, the circumstances in which engagement is pursued, and how we engage both collaboratively and alone. The Policy is designed to help clients better understand our responsible investment process.

Together with our CIG partners, we agreed a refreshed voting template ready for the 2018 proxy voting season. This seeks to reflect emerging best practice and from 2018 will tighten voting criteria further on executive pay, gender diversity in boards, and climate change.

The final quarter is traditionally quiet for proxy voting in the UK and Europe; we voted at nine UK meetings and 18 meetings in Europe. In the UK we opposed or abstained 19% of resolutions including eight remuneration reports and policies. In Europe we opposed 6% of resolutions.

Ethical Investment Review September 2017

Principles of Responsible Investment (PRI)

We have again achieved top scores in the annual PRI survey of environmental, social and governance (ESG). PRI gave us the highest score of A+ for strategy and governance as well as for incorporating ESG issues into our listed equities investment process. The scores reflect the benefits to clients of our integrated approach and commitment to ethical investment.

Climate change

There were several Memorials on climate change to Methodist Conference again this year. The proposed replies to these memorials were amended by a Notice of Motion, following a close vote. This calls on CFB and the committee advising it on ethical investment matters to:

  1. Examine the pace of change in the extractive industry sector;
  2. In the light of increasing urgency for more global action, continue actively to consider disinvestment;
  3. Report to the 2018 Conference with the expectation that [for] any company that [has] not aligned its business with the Paris Agreement target, [there would] be a recommendation that the Church disinvest.

We have therefore accelerated our process of review and analysis in order to report in 2018, with a programme of intense work. This is a complex investment issue and we will report to clients on progress on a regular basis.

We have also joined a collaborative initiative facilitated by IIGCC that will engage with over 100 leading companies over the next 3-5 years. This will encourage companies to reduce emissions in line with the Paris Agreement and increase climate-related financial disclosures in line with TCFD (Task Force on Climate Related Financial Disclosures) recommendations.

Extractive industries

Cobalt mining has attracted significant attention given the increase in demand from electric vehicles and mobile technology. Cobalt is sourced, in the main, from the Democratic Republic of the Congo (DRC). Ongoing conflict in the DRC has resulted in grave human rights concerns in the extractives sector. We wrote to Vodafone to understand its approach to potential ‘conflict minerals’ issues. We have also asked Wespath as manager of our US holdings for its views on Apple.

We engaged with Rio Tinto regarding biodiversity protection in Madagascar, and the company provided us with a strong reassurance. Following engagement, Anglo American provided comprehensive answers to our enquiries after local community representatives expressed concerns over the safety of tailings management at the Minas Rio project in Brazil.

Human rights

Incidences of Modern Slavery affect nearly every country, and under the UK’s Modern Slavery Act companies are required to conduct sufficient due diligence to understand potential risks. We asked Tesco about supermarket car washes, where trafficking has been identified as a risk. The company provided a comprehensive response, confirming that a series of audits and checks revealed no incidences of potential trafficking. Tesco also set out its process to ensure thorough checks are carried out at all franchised car washes.


On behalf of the Church Investors Group (CIG), we are once again leading an engagement process on water risk in high impact sectors. A universe of 20 UK and European companies has been selected for targeted engagement, principally in the chemicals, construction, retail, and housebuilding sectors. The results will be available in the New Year.

Labour rights

There is a growing body of evidence that supports greater awareness of how companies treat their staff. We have long engaged with business on the adoption of the Living Wage. A new initiative led by Share Action aims to secure improved disclosure on workforce reporting, modelled on initiatives such as the CDP. The Workforce Disclosure Initiative would target the FTSE50 and seek to enhance investor insight into a range of employment issues. We are liaising with Share Action about the initiative.

French oil multinational Total had been excluded from investment from the 1990s regarding allegations that its operations in Myanmar/Burma had become associated with government forced labour practices. Following progress in Myanmar/Burma we reviewed the exclusion and met with the company to discuss its overall human and labour rights practices. JACEI reviewed progress and recommended there was no longer an ethical bar to investment, since the company’s approach to human rights is seen as among the best in the industry and meets the criteria set out in our Human Rights and Conflict Policy. The company has no exposure to the current situation in Rakhine state.

Fair Trade

J Sainsbury responded to our questions regarding its decision to pilot its own ‘fairly traded’ tea mark. The company stated that “ethical and sustainable sourcing” remained at the heart of its approach, and that the pilot programme around tea sourcing was designed to meet “increasingly complex challenges” whilst continuing to guarantee existing financial benefits to farmers. We have since sold our holding on financial grounds not linked to this engagement.

We also engaged with Tesco and were heartened to learn that it remains committed to continuing to use both Fairtrade and Rainforest Alliance accreditation.

Corporate governance & executive remuneration

The third quarter marks the end of the 2017 UK proxy voting season and we voted at 26 UK meetings, opposing or abstaining 12% of resolutions including 22 remuneration reports and policies (61%). In Europe we voted at 11 meetings, and opposed 23% of all resolutions. During the quarter we published a revised Corporate Governance Policy that replaces several older corporate governance and voting policies. This is available on our website. We exercise our votes at company meetings in accordance with a template drawn up with fellow CIG members. We are reviewing the template ahead of the 2018 voting season.

Fossil Fuels and Ethical Investment

Fossil Fuel Investment Ethics

Whilst climate change must be dealt with at government level, businesses and investors also have an important role to play

Climate change poses serious challenges to us all. The recent COP 21 summit in Paris recognised this challenge and made government level moves to transition to a low carbon economy. Whilst climate change must be dealt with at government level, businesses and investors also have an important role to play.

This is something Epworth Investment Management and the Central Finance Board of the Methodist Church (CFB), which manages investments on behalf of the Methodist Church in Great Britain, has long recognised. In 2015 Epworth extended its policy on climate change to address the complex challenges presented by different types of fuel. As a result two holdings were sold and four more excluded from potential investment on ethical grounds. This was because they all had business models based on the exploration for, and development of, new fossil fuel assets. A holding was also sold due to the company’s exposure to thermal coal and its ongoing commitment to the business.

The Methodist Church has responded to the challenge of climate change in a variety of ways. At the 2015 Methodist Conference there were three Memorials and a Notice of Motion on the subject as well as a debate on the report Fossil Fuels and Ethical Investment. This year the Joint Advisory Group on the Ethics of Investment (JACEI), convened a forum to examine the theology, economics and likely scenarios of climate change as well as the case for disinvestment. The Forum was held in London on 23 March. Recognised climate change specialists and concerned NGOs helped us evaluate what was said, with the aim being to assist JACEI in discerning the appropriate advice to offer Epworth and the CFB related to fossil fuels and climate change.

Epworth’s Climate Change Policy sets out how we encourage companies to reduce greenhouse gas emissions and improve their disclosure. This was the impetus behind our membership of Aiming for A, a coalition of institutional investors with £230bn assets, including other members of the Church Investors Group, the Local Authority Pension Fund Forum, and the Pensions Trust. Aiming for A was launched in 2012 to engage on climate and carbon risk with the 10 largest UK extractives and utilities companies. The aim is to drive carbon risk management and disclosure by encouraging companies to improve their rating to the top band as measured by CDP (formerly Carbon Disclosure Project). The Survey’s scoring methodology gives considerable weight to operational emissions management.

Fossil Fuels Ethical Investment

In 2015 the Coalition successfully co-filed shareholder resolutions for the BP and Shell AGMs

In 2015 the Coalition successfully co-filed shareholder resolutions for the BP and Shell AGMs, encouraging the companies to better manage their own carbon emissions. Both resolutions were backed by the companies and the votes were both over 98% in favour. The impact of the resolutions can already be seen with the companies beginning to integrate climate change into their business strategies.

Aiming for A is now calling for major mining companies to step up their disclosure and signal that they have taken on board the challenges posed to their businesses by the global drive to mitigate climate change. In December 2015 the Coalition submitted ‘supportive but stretching’ shareholder resolutions to Anglo American, Glencore, and Rio Tinto with the aim of encouraging them to accelerate their efforts to adapt to a low carbon economy. Those co-filing these resolutions now represent over $4 trillion of assets. The resolutions direct the miners to address five main areas including reducing operational carbon emissions as well as supporting research and development into low-carbon energy. Shareholders will vote on the resolutions at the companies’ AGMs in the spring.

Ethical Investment Review June 2017

Ethical issues in the food & beverage industry

We work extensively to encourage companies to take seriously the threat of climate change.

Climate change

We work extensively to encourage companies to take seriously the threat of climate change. We do this through engagement, including in partnership with other investors. and through shareholder resolutions. We apply our research capabilities to ensure our portfolios reflect our ethical stance, which can lead to disinvestment in some cases.

We co-signed a letter from the Institutional Investors Group on Climate Change to the G7 and G20 leaders urging them to meet their commitments under the Paris Agreement and to drive investment in low carbon technologies as part of a transition framework. We also wrote to Centrica about its 25% stake in the Bowland Shale Basin in Lancashire, noting the effect on climate change and emissions and the potential environmental and community impact associated with fracking. We asked Centrica to provide more information on how it plans to keep within the two degree limit whilst it invests in shale gas exploration.

Through our partners in Wespath, part of the United Methodist Church in the US, our main overseas portfolio was involved in filing a successful resolution at the Occidental Petroleum AGM, with 67% support from shareholders who voted. The resolution called on the company to provide a detailed report assessing the impact of climate change. We also supported a similar resolution at the ExxonMobil AGM, co-filed by the Church of England, which received 62% support. We abstained on a shareholder resolution at the Royal Dutch Shell AGM which called on the company to set targets for its Scope III emissions (the emissions of its customers). We believed the target was impractical but were disappointed with the company’s response. The resolution attracted little support.

We are founding members of the Transition Pathway Initiative (TPI) which aims to determine how companies are progressing towards full transition. In June the TPI launched a sector review on utility companies. We use the TPI as a research tool.
The Methodist Conference this year expressed concern at the low rate of progress from Oil and Gas companies responding to climate change. Conference called for a lower disinvestment threshold based on when companies will be acting consistently with a 2C or below target. Our ethical investment advisory committee will be returning to this issue in detail and we will also be extending our analysis and engagement.

Breast Milk Substitutes Reckitt Benckiser engagement

Through the Church Investors Group, we engaged with Reckitt Benckiser over its planned acquisition of US infant nutrition business Mead Johnson

Breast milk substitutes

Through the Church Investors Group, we engaged with Reckitt Benckiser over its planned acquisition of US infant nutrition business Mead Johnson. Mead Johnson achieved a disappointing bottom position in the latest Access to Nutrition Index breast milk substitutes (BMS) rankings, suggesting its approach to the marketing of BMS products is considerably below best practice. We will continue to monitor the situation.

Extractive industries

We engaged with Rio Tinto after allegations were made that the company had relaxed its biodiversity commitments in Madagascar. The company stated in reply that a new independent multi-disciplinary committee would be overseeing the implementation phase of the site’s biodiversity and natural resources programme. We wrote to Anglo American after local community representatives expressed concerns over the safety of tailings management at the Minas Rio project in Brazil. We await a response. We participated in a BP meeting for responsible investors in which its 2016 environmental, social and governance performance was presented. BP appears to be developing interests in renewable energy and biofuels, albeit from a low base.

Fair trade

The fair trade movement has been one of the great success stories in terms of raising standards and improving economic livelihoods. We were therefore disturbed to learn that J Sainsbury, among the most significant UK contributors to sourcing fair trade produce, may be considering withdrawing from the Fairtrade mark and replacing it with an alternative ‘fairly traded’ standard. The Methodist Conference expressed its deep anxiety at the move by passing a Notice of Motion calling on the Church to engage with supermarkets to continue to support the Fairtrade Foundation Fairtrade mark. We will be engaging with the companies as shareholders.

Church Investors Group

We participated in the annual CIG conference in June. Its sessions focused on executive remuneration, climate change and how members can work with fund managers to deliver responsible investment objectives. The conference included speakers from Barclays, the Taskforce on Climate Related Financial Disclosures and the London Business School.

Executive Remuneration and Ethical Investment

We will soon publish a revised and updated statement of our corporate governance voting policy

Corporate governance & executive remuneration

We exercise our votes at company general meetings in accordance with a template drawn up with fellow Church Investor Group (CIG) members. This year is for many UK companies a Remuneration Policy year, in which binding proposals are put to shareholders on pay policy for the period 2017-2019. We voted against many policy proposals as being either excessive or providing a poor link to performance.

The majority of UK AGMs take place during the June quarter, and we voted at 73 UK meetings, opposing or abstaining 13% of resolutions including 66 remuneration reports and policies (62%). In Europe we voted at 178 meetings, and opposed 22% of all resolutions.

We will soon publish a revised and updated statement of our corporate governance voting policy.