Ethical Hub : Ethical Reviews - Ethical Investment Review June 2021

Climate Emergency

The re-assessment on the compatibility of companies in the oil & gas sector with the Paris Accord that we have been conducting for our ethical advisory group (JACEI) was completed in the Spring. This updated our previous assessment with new information and also recognised that the transformation required of companies grows more demanding as time passes. This analysis noted that those remaining companies in our portfolios (Royal Dutch Shell and Equinor) continued to invest significantly greater sums in their oil & gas divisions than in their renewable assets, and that the pace of corporate change in these companies was insufficient to meet the urgency of the climate emergency. Further engagement after the analysis produced lacklustre results. As a result, JACEI advised that there were no companies in the oil & gas sector compatible with the Paris Accord and we sold our holdings in Royal Dutch Shell and Equinor.

We further analysed BHP Group, a diversified miner with some oil & gas interests. While BHP Group has disinvested from some coal assets, it remains committed to significant future capital expenditure in its oil & gas assets. This again meant that JACEI advised that BHP Group’s business model was not compatible with the Paris Accord, and we sold our holding. We remain hopeful that the speed of corporate transformation will accelerate in the coming years, and that companies which have historically been focussed on the oil & gas industry will change such that they are compatible with the Paris Accord.


In February 2021, we co-filed a resolution which asked Tesco to set and report on a target for growing the proportion of its sales from healthier products. The CFB and Epworth are supporting investors of the Access to Nutrition Index and signatories to the Investor Statement on Nutrition and Health. We, along with other institutional investors coordinated by ShareAction, had engaged with Tesco prior to co-filing on this topic. As a result of the resolution Tesco made commitments to increase the share of healthy products from 58% to 65% of sales by 2025 in its UK and Republic of Ireland Tesco stores. Further engagement from investors led to Tesco strengthening these commitments by setting out further actions to be applied to its Booker Group subsidiary and its Central European operations. The company’s new plans commit Tesco to action on health across its entire retail group. As such, the coalition of investors withdrew its resolution. A two-year process of engagement has been agreed between Tesco, ShareAction and investors in the Healthy Markets Coalition, as Tesco implements the new commitments.

Climate Action 100+

We continue to co-lead on Anglo American engagement as part of Climate Action 100+. We have had investor meetings with the company twice this year and continue to work with the company as it looks to reduce emissions across its operations. Anglo American demerged its South African thermal coal assets, which listed as Thungela Resources on the South African and London stock exchanges. The company also recently announced its exit from Cerrejon in Columbia, a joint venture it was part of with BHP and Glencore, which it expects to complete in 2022. This will bring Anglo American’s exit from thermal coal to an end.

Human rights

In collaboration with the Joint Public Issues Team of the Baptist, Methodist, and United Reformed Churches, we have begun to investigate and analyse allegations concerning human rights and the use of Uyghur Muslim labour in the global textile supply chain. This analysis will develop over the coming months and give us the opportunity to engage with companies where appropriate.

Fair Tax Mark

We continue to be active in engaging with companies in our portfolio on the topic of fair tax. Following our correspondence with FDM Group earlier in the year, we had a constructive meeting with the company to discuss the issue further. JACEI recently released its short report for the year, which focuses on Tax Justice. This is available to read on our website.

Carbon footprint

We continue to seek ways to develop and broaden our reporting related to the carbon intensity of our portfolio. This year we utilised two providers – giving us a balanced methodology to our reporting approach. According to the methodology aligned with the Taskforce for Climate Related Financial Disclosures (TCFD), the CFB UK Equity has a carbon footprint (weighted average carbon intensity) of 13% below its benchmark. Further independent data from Trucost suggests that the carbon intensity of the portfolio has decreased by 0.3% over the last year and by 1.3% p.a. over the last ten years. The Epworth Climate Stewardship Fund which has a carbon footprint mandate to be at least 15% below that of the FTSE All Share Index, reported as 69% less intensive than its benchmark at the end of 2020. The Epworth Global Equity Fund reported an end of 2020 result of 61% less intensive than its benchmark.

Corporate Governance

Q2 continues to be the busiest time for voting, with many companies having their AGM during the quarter. We saw an increase in companies in both the UK and globally putting climate related resolution to a vote as attention to how companies are transitioning to a low carbon economy increases. The most dramatic vote was at Exxon, where investors voted against the recommendation of management to appoint independent directors proposed by a climate activist hedge fund. Exxon is excluded from investment owing to climate change, and so we could not participate in the vote.

We continue to vote against a large number of remuneration policies on the basis of our shared Church Investors Group voting policy. During the quarter we voted against 53% of renumeration reports in the UK and 64% globally. Following the changes to our policy to vote against members of nomination policies where board diversity is insufficient, we voted against the election of 14% of directors.