Epworth Investment Management (Epworth) has defined its mission, alongside the Church, as: seeking practical solutions which combine Christian ethics and investment returns. Epworth’s aim is to:
Epworth integrates ethical considerations into its investment process, evaluating environmental, social and governance (ESG) risks in the businesses in which it invests. Screening is applied both to stock exchange and fixed interest securities.
Epworth applies ethical exclusions by way of screening that seeks to avoid investment in companies with material or significant exposure to the following areas of business activity:
Companies in the extractives sector are excluded from investment until being ‘positively’ screened as acceptable for investment, usually following a period of engagement.
Under our climate change policies companies are excluded where they have a significant exposure to high emitting sectors such as coal and oil sands, or where they are ‘wholly or mainly’ committed to fossil fuel exploration.
Other ad-hoc exclusions may be applied from time to time, for instance where there may be human rights concerns. This would normally follow a period of close engagement and dialogue.
The principal means by which Epworth exercises ethical stewardship is through engagement with investee companies. This is sometimes known as ‘active ownership’. Engagement is applied both to stock exchange and fixed interest securities. The way we approach Stewardship is set out as part of our annual Statement under the UK Stewardship Code, to which we are a Tier I signatory.
Epworth encourages high standards of ethical business practice and will seek to engage where we:
Engagement is carried out by all members of the Epworth investment team, including senior management via written correspondence (letters and e-mail), telephone conference calls, or face to face meetings.
Epworth may choose to engage with investee companies collaboratively. Epworth is involved in a number of collaborative investor initiatives in which effort is pooled. The principal, but not sole, means of exercising such engagement is through our membership of the ecumenical Church Investors Group (CIG), https://churchinvestorsgroup.org.uk where we lead or support various engagement strands. One of the core strategic goals of the CIG has been defined as:
Other collaborative engagements are conducted through our memberships of the IIGCC (Institutional Investors Group on Climate Change), PRI (Principles of Responsible Investment), BBFAW (Business Benchmark on Farm Animal Welfare), and FAIRR (Farm Animal Investment Risk & Return). The CFRB uses other investor tools and benchmarks such as the Access to Medicines Index and Access to Nutrition Index, in order to conduct engagement.
Epworth routinely engages with investee companies itself on a range of material ESG issues, which have recently included:
Responses are evaluated to determine whether further intervention is required, or whether the engagement may be deemed satisfactory and therefore closed. Where a company fails to respond after a reasonable period of time, a follow up approach is made, either to the same recipient or (wherever possible) to an alternative named individual.
Company preparedness in response to climate change and board diversity have been integrated into our corporate governance voting policy, which may result in oppose votes being registered against the re- election of individual directors, or against the adoption of the Annual Report & Accounts.
Engagement is normally targeted at senior management, specifically:
Meetings are typically held with sustainability or corporate responsibility professionals or with the senior leadership team.
From time to time Epworth is invited to consult on corporate remuneration proposals, and it is our policy to respond constructively to these consultations.
Epworth may respond to, or participate in, public policy consultations on either corporate governance, corporate reporting or wider stewardship reviews, where these are of material interest. Epworth may also engage with other public bodies such as regulators, government or supra-national bodies such as the OECD or EU on specific matters pertinent to ethical investment stewardship.
Epworth engagement activity is published quarterly in our Responsible Investment Review for clients and online at www.epworthinvestment.co.uk/news-and-library/ethical-hub/. More information on engagement activity is published in the annual JACEI Report to Conference, which is also available online.