Ethical Hub : Ethical Reviews - 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.