Ethical Investment Review December 2020

Climate emergency

During the quarter, we have continued to update our assessment of oil and gas companies in response to the 2018 Notice of Motion at Methodist Conference, and in light of the 2020 Methodist Conference and Council outcome. Climate strategy updates for Equinor and Repsol were released in November, with Equinor announcing its ambition to become a net-zero energy company by 2050, as well as its plans to achieving carbon neutral global operations by 2030 and reducing absolute greenhouse gas emissions in Norway to near zero by 2050. Repsol released its strategic plan for 2021-2025, which notes, among other climate related announcements, the planned expansion of its low carbon generation business, which will have a generation capacity of 7.5 gigawatts by 2025 and 15 gigawatts by 2030.

We continue to engage with companies as part of Climate Action 100+. In December 2020, CA100+ released a progress report outlining company progress across the 160 companies covered. These companies represent over 80% of global industrial emissions. The report shows that while some companies are taking steps to decarbonisation in line with a net-zero emissions by 2050 trajectory, there is a long way to go. Nearly half (43%) of companies have set a net zero by 2050 target or ambition in some form, however only 10% of focus companies have net-zero targets that explicitly cover the companies’ most material scope 3 emissions.

Through IIGCC, and along with other investors, we wrote to the Audit Committee Chair of 36 European companies calling for Paris-aligned Accounts. The paper accompanying the letter which outlines Paris-aligned Accounts noted five steps for directors to take, including an affirmation that the goals of the Paris Agreement have been considered in drawing up the financial statements. It also outlines expectations for auditors to highlight where accounts are ignoring material climate risks and making it clear they should say when accounts are not ‘Paris-aligned’. The companies written to were companies that could face material headwinds from a move onto a 2050 net zero pathway, including oil and gas, and mining companies, transportation companies, and materials companies such as CRH.


We wrote to Rio Tinto regarding the incident at Juukan Gorge, Western Australia where an aboriginal site was blasted. Although Rio Tinto had obtained the legal permissions and engaged with the Puutu Kunit Kurrama and Pinikura (PKKU) peoples throughout a multi-year process, new information on the heritage of the site, which came to light prior to the blast, did not result in the blast being halted or postponed. Rio Tinto has apologised for this failure, and the CEO and other senior executives have stepped down. This engagement aimed to understand the long term changes taken place at Rio Tinto to ensure an incident of this nature does not happen again, and to learn more about the cultural heritage management and relations with the Traditional Owners.

We received a comprehensive response, which noted the creation of a new role of chief advisor, Indigenous Affairs, who has a direct reporting line to the Chief Executive. This role is to be filled by a senior Indigenous leader. There is also ongoing consultation about a proposal to establish an Indigenous Advisory Group to help the company better incorporate Traditional Owners’ views and concerns into its operations. The company has also committed, among other things, to reassess any activity that has the potential to impact heritage sites, with an immediate focus on locations that could be impacted over the next 18-24 months.

Along with other investors, we also wrote to mining companies including Anglo American and BHP Group regarding the incident at the Juukan Gorge, asking for: assurance of their policies and procedures on their approach to relationships with Traditional Owners; information regarding the governance frameworks and Board oversight of the issues; specific action or actions that company has taken to identify and manage the risks across its business; and how the company intends to disclose in relation to issues. We look forward to hearing back from these companies in due course.

COVID-19 and food producers

Following on from news articles and previous engagement, we wrote to five food producing companies, asking about their policies and processes when responding to any possible outbreak of COVID-19 in food manufacturing plants, as well as in regard to sick leave and pay for staff who have to self-isolate due to the Coronavirus. So far, we have heard back from three (Hilton Food Group, Cranswick, and AB Foods) out of the five, and will continue to engage with these companies. We were particularly impressed with the response from Hilton Food Group.

Fair Tax Mark

We wrote to a number of companies including Softcat and Howden Joinery to highlight the Fair Tax Mark, and to encourage companies to become accredited. The Fair Tax Mark recognises businesses which transparently pay the appropriate amount of tax, in the appropriate place, at the appropriate time. We believe this is a vital component of a fair and equal society, where business supports the upkeep of the economic and social environment in which it operates. We know that this isn’t a quick process for companies to complete, and therefore expect this engagement to be over the longer term. Encouragingly, we have heard back from one company already, noting the steps it is taking to prepare for a potential application.

Executive remuneration

We have engaged with Brooks Macdonald and MJ Gleeson on remuneration, giving feedback where we have voted against the remuneration report in line with our policy. We inform companies of our voting policy at the start of every voting season, and encourage dialogue with companies on it.

Corporate governance and voting

It was a quiet quarter for voting. We voted against the majority of remuneration reports at UK meetings. We voted against the entire Remuneration Committee at Ferguson as the remuneration report breaches multiple principles in our template. We supported shareholder resolutions at two Australian banks which called for climate emergency transition planning disclosure.

Voting Report – December 2020

Christian Ethics in Practice January 2021

Featuring our work on Tax Justice, Principles of Responsible Investment, Modern Slavery and Mining.

Ethical Investment Review September 2020

Climate emergency

The climate emergency continues to be our focus. We are working with other investors to encourage companies to provide the data needed to judge progress towards a net zero emissions world. We continue to review the oil and gas sector, tracking new company announcements and reconsidering our analysis of the sector. We expect to publish a further report on the sector in Q2 next year. There was no change in the quarter to our oil and gas ethical exclusions, despite BP (an excluded company) announcing demanding targets to reduce its absolute emissions and invest further in renewables.

At its climate change related day BHP Group presented on its new climate commitments. The company set out actions to reduce operational emissions by at least 30% by 2030, from adjusted 2020 levels. It has also strengthened the linking of executive remuneration to the delivery of its climate plan. The update also included insight into the performance of BHP’s portfolio in a transition to a 1.5°C scenario, which showed increased demand for most products in the next 30 years compared to the previous 30 years, barring oil, and energy coal.

Meat producers

We met with Hilton Food Group (virtually) in Q3 and discussed its approach to sustainability and followed up on the issue of supply chain emissions. Hilton Food Group package meat, as well as fish and alternative proteins, for supermarkets across Europe and Asia Pacific. The company is considering innovations in feed and farming that can reduce emissions in the supply chain, particularly methane from cattle. The company has set an objective of carbon intensity reduction of 15% in emissions of cattle by 2025. This is aligned with the environment target of the European Roundtable for Beef Sustainability.

Mining – Rio Tinto

On 24 May 2020, Rio Tinto detonated an area in Western Australia which was deemed to have high significance to the native people of the region. The area of interest was land belonging to the Puutu Kunti, Kurrama and Pinikura People (PKKP) within the Juukan Gorge. Although Rio Tinto had obtained the legal permissions and engaged with the PKKU peoples throughout a multi-year process, new information on the heritage of the site, which came to light prior to the blast, did not cause the blast to be halted or postponed. Rio Tinto has apologised for this failure, which appears systemic in nature, and the CEO and other senior executives have stepped down. We have followed this closely since May and we are looking for the company to refresh its culture and reform its procedures.

Mining – tailings

In August, the Global Industry Standard on Tailings Management was launched, establishing a global standard on tailings management for existing and future tailings facilities. The Standard has been developed through the Global Tailings Review, which was co-convened in March 2019 by the United Nations Environment Programme (UNEP), Principles for Responsible Investment (PRI), and International Council on Mining and Metals (ICMM). The Standard has been established in response to the disaster at the Córrego do Feijão iron ore mine in Brumandinho, Brazil in January 2019. The tailings dam suffered catastrophic failure which killed 270 people, with 11 missing persons. We participate in the Investor Mining and Tailings Safety Initiative which called for the Standard to be established.

Principles for Responsible Investment

CFB/Epworth once again received an A+ score from PRI for our Strategy and Governance, which we have attained for the last few years. We also received an A or higher across the Listed Equity and Bond modules. The Principles for Responsible Investment (PRI) runs an annual survey for investment firms and asset owners to outline their responsible investment activities.

Healthy markets

In our March report, we highlighted our participation in the Healthy Markets Initiative coordinated by ShareAction. Having participated in several webinars and briefings provided by ShareAction, we engaged with two supermarkets on the topic of childhood obesity, requesting further information about their promotions, strategy and targets. Both Tesco and Ocado responded to our engagement, outlining the steps they are taking to respond to the issue. Tesco noted its reformulation strategy of own brand products, and its commitment to increasing positive nutrients such as fibre, fruit, and vegetables, alongside reducing nutrients of concern e.g. fat, salt, and sugar.

Modern slavery

We continue to work as part of the Find It, Fix It, Prevent It programme with others to tackle Modern Slavery. This engagement asks companies “Have you found modern slavery in your operations or supply chain this year?”. We continue the dialogue from that point. We are engaging with two companies on this issue in the hospitality sector at present: Compass Group and InterContinental Hotels Group.

Fair Tax Mark

Epworth Investment Management has become the first fund manager in the UK to be accredited by the Fair Tax Mark. 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. We promote the Fair Tax Mark when we engage with companies.

We engaged with MJ Gleeson, a UK housebuilder held in our portfolios to encourage them to become accredited and it has become the first company in its sector to do so.

Corporate governance and voting

Q3 is a quieter quarter for voting. In the quarter, we voted against 67% of remuneration reports in the UK Equity Fund and 57% in the Global Equity Fund. In addition, we opposed or abstained on the election of 19% of directors in the UK Equity Fund – this is normally as a result of poor practices relating to either remuneration or diversity.

Unilever had a special vote regarding the unification of its dual structure, which passed with 99% of the vote.

Voting Report – September 2020

Voting Report – June 2020

Ethical Investment Review June 2020

Climate emergency – assessment of fossil fuel companies

The latest stage of our work on oil and gas companies and the climate emergency was finalised during the quarter. The Joint Advisory Committee on the Ethics of Investment (JACEI) reported its findings and an update on recent developments to Methodist Conference. It was responding to a request by the 2017 Conference to review the fossil fuel sector. Its report reflected the culmination of three years of work we undertook, establishing and implementing a methodology for assessing oil and gas companies in the context of projections going forward decades, together with extensive engagement with many of those companies.

We assessed 15 companies across five different categories using up to 25 metrics. As a result, the funds we manage exited three holdings – BP, Total and ARC Resources, and we excluded a further ten (including Exxon, Chevron and ConocoPhillips) based on this work. JACEI advised that there was no ethical bar to investment in Royal Dutch Shell, Equinor, ENI and Repsol. These companies have all made commitments that lead JACEI to believe they are aligned, or are close to being aligned, with the Paris Agreement to keep the average temperature rise “well below 2°C”. We will continue to engage with these companies to press for more detail on their commitments and for further action.

Royal Dutch Shell

Royal Dutch Shell announced new ambitions for transitioning to a lower carbon world. It now aims to reduce carbon intensity to be line with global warming of 1.5°C rather than 2°C by 2050. Shell continues to talk about long-term ambitions at the pace that society transitions to a lower carbon world, rather than firm targets. It is focused on reducing emissions intensity rather than absolute emissions targets. Nevertheless, the announcement set a new standard for the industry.

Anglo American

We co-lead on engagement with Anglo American on behalf of the Climate Action 100+ investor coalition. At its most recent AGM, Anglo American announced it was working towards a possible demerger of its thermal coal business in the next two or three years. It announced a commitment to be carbon neutral across its operations (Scopes 1 & 2) before 2040. The company also released Scope 3 estimates and outlined its approach to these emissions, which it cannot control. It was responding to our questions. These are welcome commitments by the company and we will continue to engage on the issue.

Epworth Climate Stewardship Fund

Epworth Investment Management Ltd launched the Epworth Climate Stewardship Fund for Charities in late May. The Fund applies all of our existing ethical policies and also excludes companies that derive more than 10% of revenues or profits from fossil fuel extraction. It also looks to invest in companies that positively contribute to the transition to a low carbon economy, and is designed for those of our customer who want to disinvest from fossil fuels. More information on this fund is available on the Epworth website.


We co-filed a resolution at Barclays’s AGM, as part of a coalition co-ordinated by ShareAction. This attracted the support of 24% of shareholders. The board proposed an alternative resolution with a net-zero ambition and a commitment to align its activities with the Paris Accord, but which did not have a timeline to phase out lending to fossil fuel companies.

Coronavirus & mental health

According to the NHS, one in four people in the world will be affected by mental or neurological disorders at some point in their lives. The impact of social isolation, uncertain employment, or bereavement due to coronavirus, could have mental health consequences for many. We co-signed a letter to FTSE 100 constituent companies encouraging them to protect the mental health of their workforces during this extraordinary time. We called for an action plan specific to mental health during COVID-19 to be introduced at each workplace, which may include training for managers on how to spot warning signs and clear provision of details on how to access support. So far, comprehensive responses have been received from companies including AB Foods, Experian and Halma.

Modern slavery

In its most recent Modern Slavery statement, Tesco noted instances of Modern Slavery in its supply chain in Thailand and Malaysia. We recognise that there is Modern Slavery in most, if not all supply chains, and, while we work collectively to eradicate Modern Slavery in society, that cannot be done without first uncovering it. This transparency from Tesco is welcome, along with its further investigation and action plans for the sites involved. We have previously engaged with Tesco on Modern Slavery. We are also part of the Find it, Fix it, Prevent it engagement on this matter with companies in the hospitality sector.

Gender diversity

In 2016, the Hampton-Alexander review set recommendations for FTSE 350 companies to improve the representation of women at the board level and in senior management. It set a minimum 33% target to be reached by the end of 2020. In February 2020, FTSE 100 companies in aggregate reached this goal. However, the FTSE 250 had not. With less than six months to go, we continue to vote on gender diversity by voting against the re-election of the Chair of the Nominations committee at FTSE 350 companies where the Board composition is not at least 33% women. We are looking at how other aspects of diversity can be considered effectively.

Corporate governance and voting

Q2 contains much of the AGM season, when companies with December year ends report to their shareholders. This year has seen an increase in the number of climate change resolutions (see Barclays above), and a number of ‘revolts’ where substantial minorities of shareholders voted against remuneration reports or executive pay schemes. These included Intertek, Lloyds Banking Group and Ten Entertainment Group among our holdings – we voted against remuneration policy in all three cases. Overall, during Q2 we voted against 63% of remuneration reports in the UK Equity Fund and 62% in the Epworth Global Equity Fund.

Christian Ethics in Practice July 2020

JACEI Annual Report 2020

Voting Report – March 2020