Further Interest Rate Increase for Epworth’s Charities Deposit Fund

Charity Deposit Fund Interest Rate Increase

“Over a year, this increase will provide around a quarter of a million pounds of additional income to support them in their great work.”
David Palmer, Chief Executive Officer

Epworth Investment Management Limited, the UK investment manager dedicated to serving the needs of Churches and Charities, today announces a further increase in the interest rate payable to investors in its Affirmative Deposit Fund for Charities (“the Fund”). The interest rate increased to 0.40% (previously 0.35%) from 1 March 2018, following an earlier increase in December 2017.

The Fund continues to provide a competitive rate of interest (the best in the market for a common deposit fund) and a high level of capital security. It is an effective way for charities to maximise returns on their short-term cash surpluses, while retaining same-day access to their money. Charities currently invest around £500m in the Fund.

David Palmer, Chief Executive, commented: “We are committed to supporting our church and charity investors in delivering their mission. Over a year, this increase will provide around a quarter of a million pounds of additional income to support them in their great work.”

Converting boardrooms to a higher form of capitalism

Stephen Beer, chief investment officer of Epworth Investment Management Limited,
The Sunday Telegraph, Sunday 4 March 2018

After years in the shadows, the Church has become an active investor and serves as a moral compass for the FTSE 100, writes Tom Rees

‘Earn all you can, save all you can, give all you can,” the Methodist Church’s founder John Wesley urged his followers two centuries ago. In 2018 his teachings are not considered essential reading for City fund managers but his words reverberate in the ears of Stephen Beer, chief investment officer at Epworth, an ethics-conscious asset manager owned by the Methodist Church.

An attempt by churches to shape modern corporate culture will surprise few but even the most seasoned parishioners might be unaware that they are leading the charge with investment arms managing billions of pounds.

The Church of England is also using the considerable weight of its £7.9bn investment fund to ramp up the pressure on boardrooms skimping on their social responsibilities, while also being an invaluable source of income.

The Church Commissioners, the Church of England’s investment arm, donated £230.7m to the Church, some 15pc of its funding, in 2016, paying clergy pensions, keeping cathedral doors open and investing in schemes to tempt people back to the pews.

Its strategy for influencing markets has evolved from quietly avoiding so-called “sin stocks” to holding corporate giants’ feet to the fire on a range of issues, from excessive pay to climate change, to modern slavery.

Church funds often avoid sinking their capital into stocks investing in arms, gambling, pornography, alcohol and tobacco, areas deemed inappropriate for the Church to profit from. Around 12pc of the FTSE All-Share Index is excluded on such ethical reasons at the Church Commissioners, for example.

Beer explains that Epworth’s fund managers draw extensively on the teachings of Wesley when making moral investment decisions. Epworth tries to offset the effect of excluding a stock for ethical reasons by rebalancing its portfolio.

“If we exclude a tobacco company, our benchmark will have more in pharmaceuticals and food retailers, for example,” he says.

Keeping their noses clean dominated the approach of church funds for decades but they have found their voice as the market’s moral arbiters since the financial crisis, becoming active shareholders and turning up the heat on badly behaving boards.

Working conditions at Sports Direct, director bonuses at FTSE 100 housebuilder Persimmon, and inaction on global warming at US oil giant ExxonMobil have all been in the crosshairs of the Church Commissioners. In the latter case Exxon eventually bowed to shareholder pressure led by the Church to outline its plans to tackle global warming, while Persimmon’s directors gave up part of their generous remuneration last week.

“They have increasingly found their voice around AGMs and proactively get involved in debates about governance, fossil fuels and green energy,” says Eve Poole, author of The Church on Capitalism.

“Other ethical investors follow the Church’s lead and that’s helping get a head of steam around ethical investment more generally.” On Friday miner Rio Tinto became the latest City heavyweight to be targeted in the Church’s quest.

The Church of England Pensions Board teamed up with the Swedish National Pension Fund and Local Government Super Fund to co-file a shareholder resolution calling on the mining giant to disclose its relationship to the Australian coal lobbyists blocking efforts to tackle climate change. Environmental causes have become the Church’s leading ethical issue raised with company boards, and the Church Commissioners often bring together a coalition of shareholders to help enact change. The Transition Pathway Initiative, a programme co-founded by the Church evaluating the move to a low-carbon economy, has collected support from companies with more than £5 trillion in assets under management.

“It is an investment risk but however you come at this issue it’s something institutional investors need to be active on,” Edward Mason, the fund’s head of responsible investment, argues. “We need the products of the mining industry, they are very much the foundations of modern life, but it’s a high-risk sector and it’s important that ethical, social and environmental issues are handled responsibly by mining companies.”

The fund is in a unique and sometimes exposed position as a holier than thou investor. The Church Commissioners were left red-faced after investing indirectly in payday lender Wonga, a company Archbishop Justin Welby had vowed to put out of business. It also had to sell its shares in Rupert Murdoch’s News Corp in the wake of the phone-hacking scandal.

Welby’s appointment as head of the Church of England five years ago has accelerated the Church Commissioners’ search for morality in markets. Last year he described capitalism as a “broken” system needing “fundamental reform”.

Poole explains that Welby’s personal interest in applying pressure on corporations and the financial crisis, exposing the “casualties of capitalism in a very visceral way”, has transformed the Church of England into an active shareholder.

“Because of the Church of England’s structure, they are the ones running the food banks so they know what this is costing,” she says. “There was always a worry about capitalism that was voiced periodically by the Church but it has got louder and louder.”

A proposal to jeopardise profits for principles would be met with a stony silence in even the most virtuous boardroom, but that trade-off is not an inevitable one.

The Church Commissioners made an excellent 17.1pc return on their investments in 2016, compared to the 8.8pc average of the UK equity income sector, according to the Investment Association.

“The performance of the Commissioners’ fund has been hugely impressive and that has helped turn the tide around ethical investment,” says Poole.

The Church’s role in capitalism is evolving from picking up those left behind to nipping ethical issues in the bud by influencing boardrooms. If it does so while continuing to reap the rewards, even the clergy of the City may be persuaded that ethical investment also pays dividends.

Step up the pressure on corporate polluters

From naughty to nice: 30 years of Christmas in the City

David Palmer, Chief Executive Officer
Originally printed in City AM, Wednesday 13 December 2017

I recently met up with an old friend that I hadn’t seen in over 30 years. “I’m fat and bald now”, I warned him. Unfortunately, when we met up, he agreed. As we talked, we pondered everything else that had changed.

I found myself recalling my first Christmas in the City. It was a time of deal tickets represented by little green slips that were to be put in the contracts tray by 4:30pm. If we wanted to know any “market colour”, we would call the “box” on the floor of the Stock Exchange. It was their job to maintain a chalk board with all the jobbers’ prices and sizes in key stocks. What felt most cutting was that, as I said this, I realised that even the term jobber is now obsolete.

Looking back, it amazes me how little regulation there was. Before we gave the actual order to the “box” we would write in the nominal, stock and whether it was a buy or a sell on our green slips. The “box” would then call back with the execution details to again be recorded on the slip. Client allocation? Well, that had to happen before the little green slip went into the contracts tray. Such lax client protection was made even worse by the fact that we only settled client positions on a net basis every two or three weeks.

It’s around Christmas when these changes become more apparent than ever.

In my time, jobber, broker and client entertainment was unfettered. Previously, the firm could be as generous as it liked, putting on events throughout December. It was common for my seniors to stumble back into the office in the late afternoon after a heavy lunch. And then there were the notorious Christmas parties; many a City legend was made at those parties.

Nowadays, a combination of legislation and cultural change has thankfully stopped all that. Staff parties have a strict PAYE (pay as you earn) limit and long drinking sessions are unacceptable. I used to dread the partners coming back from their lunch at 4pm. Many people still have a drink in the Christmas week but it’s kept sensible with the unwritten rule that you don’t go back to the office if it’s more than a couple.

One change that I’m not sure I can support is the appearance of the Christmas jumper. A couple of years ago a humorous ex-Guards chief operating officer colleague bought me one to wear in the office competition. It was at least two sizes too small and I’m not sure that the winner’s round of applause was enough compensation for the humiliation.

There is one thing that hasn’t changed.

At lunchtime on the last trading day before Christmas, we all finish early: not to go to the pub but to join our families. As we go our separate ways for the holidays, we all wish each other a “Happy Christmas” with a genuine smile and feeling of goodwill.

While not everyone may be off to celebrate Christ’s birth, he has brought us all together anyway. It’s my favourite moment in the office every year.

Interest Rate Increase for Epworth’s Charities Deposit Fund

Charity Deposit Fund Interest Rate Increase

“We are committed to supporting our church and charity investors”
David Palmer, Chief Executive Officer

5 December 2017 – Epworth Investment Management Limited, the UK investment manager dedicated to serving the needs of Churches and Charities, today announces that its Affirmative Deposit Fund for Charities (“the Fund”) will pay an increased interest rate of 0.35% (previously 0.30%) from 1 December 2017.

The Fund provides a competitive rate of interest (the best in the market for a common deposit fund) and a high level of capital security. It is an effective way for charities to maximise returns on their short-term cash surpluses, while retaining same-day access to their money. Charities currently invest around £500m in the Fund.

David Palmer, Chief Executive, commented: “We are committed to supporting our church and charity investors. I am delighted that Epworth is in a position to increase the Fund’s interest rate, which will provide some additional money to help our investors in delivering their mission.”

Epworth Investment announces rebranding

Mark O'Connor

Mark O’Connor, Head of Business Development said: “We are delighted that the new Epworth brand so effectively reflects our strong Christian investment approach.”

Epworth Investment Management announces rebrand and launches new website.

  • Rebrand reinforces Epworth’s unique Christian investment strategy
  • Follows on from the appointment of David Palmer as CEO in January 2017

27 November 2017 – Epworth Investment Management, the UK investment manager dedicated to serving the needs of Churches and Charities, today announces the business rebrand and launch of its new website (www.epworthinvestment.co.uk). The rebrand reinforces Epworth’s commitment to upholding Christian ethics in investment and highlights its bold growth ambitions as it looks to serve the needs of all Churches and Charities.

The news follows the appointment of David Palmer as CEO earlier this year. He further strengthened the team by hiring Mark O’Connor in a new position as Head of Business Development. Together, working with the experienced investment team, they will look to enhance Epworth’s reputation as the premier Christian investor in the UK.

David Palmer, Chief Executive, commented: “The new branding underpins our belief that integrating Christian ethics into investing will act as a springboard for a growing and sustainable fund management business. I am privileged to be the chief executive of a brand and business that allows me to use the skills and experience that I have developed during 30 years in the financial community in a way that reflects my core beliefs.”

Mark O’Connor, Head of Business Development said: “We are delighted that the new Epworth brand so effectively reflects our strong Christian investment approach. It reaffirms our dedication to serving the investment needs of all Churches and Charities in a way that does not compromise on their ethics.”

For all press queries related to Epworth please contact:

Seda Ambartsumian or Jason Ochere
Tel: 44 (0) 207 379 5151

About Epworth Investment Management

Founded in 1996, Epworth is an investment manager dedicated to serving the needs of Churches and Charities. We are stewards of our investors’ money and carefully select investments using Christian ethical criteria. Epworth manages assets of £1.2bn and is wholly owned by the Central Finance Board of the Methodist Church.

Citywire Wealth Manager October 2017 – The false sense of security around executive pay

Stephen Beer (pictured) is chief investment officer of Epworth Investment Management Limited, regulated by the FCA, a wholly owned subsidiary of the Central Finance Board of the Methodist Church

Investors risk being lulled into a false sense of security over executive pay.

This year’s voting season saw fewer shareholder rebellions over remuneration packages for the largest companies but that does not mean an end to the controversy.

The UK AGM season this year has seen a fall in the number of FTSE 100 remuneration packages that received significant opposition from shareholders.

There was a 35% decrease in the number of remuneration resolutions opposed by over 20% of the vote compared to 2016, according to Investment Association figures.

The Investment Association also noted that shareholders had voted against more pay packages for CEOs of medium-sized companies.

It saw these signs of shareholder activism as sending a “strong signal” to boardrooms that investors were concerned with spiralling pay awards out of line with company performance.

The increased activism seems to have had some impact even before the latest round of voting, according to the High Pay Commission and the CIPD. They have calculated that executive pay fell 17% last year, with the average salary for a FTSE 100 Chief Executive at £4.5m.

On the face of it, it would seem that shareholder democracy is working, and that companies are being held to account and are responding.

Moreover, the boards of sub-FTSE 100 companies are now very much on the radar and having to think about how they pay their leaders. Yet it is far too soon to relax.

Increasingly, institutional investors are voting against pay packages which award bonuses on the basis of insufficiently stretching performance criteria.

It is worth asking why shareholders generally support performance-related packages. They may consider that bonus scales act as incentives to better performance from the

Yet if this is the case, we should expect reams of reports from institutional investors analysing the efficacy of performance-related pay.

In any event, CEOs often express their enthusiasm for the job and insist that pay levels are incidental.

Alternatively, investors may believe it is just to reward (presumably) exceptional performance after the event, even though they have little or no evidence to suggest that higher pay led to that better performance.

Shareholders need to be mindful of unintended consequences. Andrew Smithers has argued, for example, that pay schemes encourage CEOs to focus on measures to boost earnings per share in the short term through share buybacks.

This is in contrast to risking investments in long-term projects which may not deliver returns during their tenure. The result, it is argued, is that overall levels of investment in the economy are depressed.

Lower levels of investment mean, ultimately, lower productivity in the economy, which means lower average wages. This is why we still need to take a hard look at executive pay.

The High Pay Commission and CIPD note that on an annual salary of £28,000, ‘it would take the average UK full-time worker 160 years’ to earn the average salary of a FTSE 100 CEO. The TUC noted last year that between 2010 and 2015, the median total pay of a FTSE 100 director, before pensions, rose 47% while average wages rose 7%.

It can therefore be no surprise that many advanced economy countries are experiencing tumultuous times politically. The basis of our capitalist market economy is being questioned because it is not sufficiently equitable.

Companies and investors need to get this point and work to ensure that we have a market economy that delivers for everyone, not just those at the top.

High salaries themselves are not necessarily a problem. Running a FTSE 100 company is a great responsibility, many livelihoods depend on the decisions a CEO makes and a genuinely good CEO will come at a price.

These point s are not widely appreciated. Yet the question is whether, overall, pay rewards are at the right level in the context of society. A good place to start is to check how companies are treating their lower paid employees and contractors.

In Epworth, and the Central Finance Board of the Methodist Church, we find ourselves voting against almost two-thirds of remuneration packages at company AGMs but we also lobby companies to pay the living wage.

There is probably more we could do. Investment managers as a whole should engage even more intensively with an issue which continues to be controversial.

New Management Team Unveiled

New Management Team Unveiled

David Palmer (pictured) became Chief Executive Officer of the firm. He is a Director of Epworth, leads the Executive Committee and has ultimate responsibility for all aspects of the business.

Finance Board of the Methodist Church have announced the management team that will assume responsibility when its current Chief Executive, Bill Seddon, steps down at the end of 2016. David Palmer, currently Head of Private Client Investment Management at Towry Ltd will be joining the Central Finance Board (CFB) in September and will assume the role of Chief Executive from the beginning of January. Chief Investment Officer, Stephen Beer, in an enhanced role, will take sole responsibility for devising and executing the CFB’s investment strategy. The Team is completed by Marina Philips, who remains as CFB Secretary and Chief Financial Officer.

CFB Chair, John Sandford said “We are delighted that David Palmer has agreed to join the CFB and believe that his proven record in growing asset management businesses will enable us to take the development of our wholly owned subsidiary, Epworth Investment Management (Epworth), to the next level. Together with Stephen Beer, already an acknowledged leader in the world of ethical investment, and Marina Philips, we will have a formidable team.”

On accepting his new role, David Palmer commented “Having built my career on core values based on my Christian faith, this is my dream job. I strongly believe that integrating Christian ethics into the investment process, as the CFB and Epworth have successfully done for many years, can be the springboard for a growing and sustainable fund management business.”

The CFB, an innovator in responsible investment, was established in 1960 to enable Methodist organisations to pool their assets and manage them efficiently. Epworth, its wholly owned subsidiary, was formed to allow the proven expertise of the CFB to be offered to a wider market. This is mainly done through the Affirmative range of common investment and deposit funds, which along with the CFB range of funds are managed in line with the ethical stance of the Methodist Church. The CFB and Epworth actively integrate engagement with companies on financial, ethical, social, environmental and governance performance as part of their investment decision making process.

UK Stewardship Code Statement

The UK Stewardship Code was published by the Financial Reporting Council in July 2010. It aims to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities by setting out good practice on engagement with investee companies to which the Financial Reporting Council believes institutional investors should aspire.

The Central Finance Board of the Methodist Church (CFB) and Epworth Investment Management Limited (Epworth) signalled their support of the Code in a preliminary response issued in November 2010.

The CFB and its sister organisation, Epworth, welcome publication of the Stewardship Code and this Statement publicly signals our endorsement of the Code’s Principles. The Principles of informed engagement with companies set out within the Code, lie at the heart of our investment approach; the Stewardship Code provides a valuable, additional context for enhancing the responsibilities of shareholder ownership.

Our detailed Statement in response to the seven Principles contained within the Code is set out below, and this incorporates revised recommendations made in autumn 2012.

Principle 1: Policy Disclosure

“Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities”

  • Stewardship responsibilities are discharged internally as part of an integrated investment process
  • We are long-term investors concentrating heavily on the faith and charity investment communities and we integrate the Stewardship principles of ethical and responsible investment into our investment philosophy and practice
  • We seek long-term shareholder value in which, as responsible owners, dialogue and engagement with the companies in which we invest is a fundamental part
  • We subscribe to the view that companies that take environmental, social and governance issues into account as part of their business model, will over the long-term provide superior returns for shareholders
  • We only utilise external service providers to support and inform our in-house decision making; these include proxy voting and ethical research service providers
  • Our model is to produce qualitative Position Papers on a range of material ethical and ESG subjects that subsequently lead to a Policy being adopted
  • We have produced Position Papers and Policy Statements on a range of subjects including:
    • Climate change
    • Mining
    • Defence
    • Children
    • Prisons
    • Caste Discrimination
    • Human Rights and Conflict
    • Israel/Palestine
    • Gambling
    • Food & Beverage Industry
    • Alcohol
    • Farm Animal Welfare
    • Corporate Governance
    • Screening & Engagement

Our detailed Position Papers and Policy Statements are published on our two websites: www.cfbmethodistchurch.org.uk/ethics, www.epworthinvestment.co.uk/ethical-investment

Principle 2: Conflicts of Interest

“Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed”.

  • The CFB is the investment arm of the Methodist Church in the United Kingdom; Epworth is wholly owned by the CFB. Investment policies, staff, systems and premises are shared by the CFB and Epworth
  • We do not advise or publish advice that might conflict with the responsibilities of managing investments on behalf of CFB or Epworth clients
  • Our policy regarding potential conflicts of interest and “Treating Customers Fairly” (TCF) in the conduct of investment business forms a key part of our overall compliance regime
  • Customers are at the heart of what we do, which is managing investments in an ethical and responsible way
  • Staff training, procedures and processes are in place to comply with regulatory requirements regarding TCF, however as an ethical House this is a key differentiator in the way we attract and retain clients
  • Epworth Investment Management is regulated by the FCA. The regulatory Compliance Manual retains a full conflicts of interest policy and a conflicts register. The register is reviewed annually in January
  • The CFB is an unregulated body and is not required to maintain a conflicts policy or register in the same way as Epworth, however, in accordance with best practice these conflicts of interests policies and procedures are mirrored on a voluntary basis across the CFB’s activities
  • There have been no incidences where the interests of clients diverge or where a client relationship raises a potential conflict; clients of the CFB and Epworth have a full understanding of how their investments will be managed in accordance with our declared ethical and responsible investment policies

Principle 3: Monitoring Companies

“Institutional investors should monitor their investee companies”

  • We are active managers and underlying investments are closely monitored in respect of their financial and ethical performance
  • Ethics are always on the agendas of the CFB Council and Epworth Board whose tasks are to hold the executive management and staff to account for their investment oversight
  • The Joint Advisory Committee on the Ethics of Investment (JACEI) has been established to provide advice to the CFB and Epworth. Through its regular meetings, it scrutinises our investment portfolios from an ethical perspective as well as our regular corporate governance activity
  • Engagement and oversight is normally prioritised according to the material risks (financial and non-financial) attendant on the underlying investments. Where we assess there are material concerns, these will be discussed with the relevant company
  • Our priorities for pro-active and on-going engagement currently are
    • Climate change
    • Water risk
    • Labour rights and the Living Wage
    • Human Rights & Modern Slavery
  • The team actively monitors ethical issues as part of their standard research into companies. Reports assess the material ESG issues pertinent to the company, whether there are Any business areas that conflict with our negative screens, and any areas requiring pro-active engagement
  • Ethical issues are the focus at our internal monthly Ethics Meetings, which also prioritise workflow, including engagement with companies.
  • Owing to resource limitations it is currently our policy to notify companies when we have taken voting action to oppose or abstain management proposals on an exceptional basis only. Voting is contracted to a third party provider based on an agreed template. We have built certain ESG priorities into our voting template e.g.
    • Climate change laggards
    • Diversity
    • Companies that depart from standard Corporate Governance practice
  • In the course of routine business, the CFB and Epworth, may, from time to time, become involuntary ‘insiders’. Whilst we do not willingly seek insider status, should this occur, we have internal compliance procedures in place to report it that accord with best practice

Principle 4: Escalation Policy

“Institutional investors should establish clear guidelines on when and how they will escalate their Stewardship activities.”

  • We have adopted clear practices and processes for the escalation of engagement oversight, depending on the nature of the issue
  • As responsible investors we seek to meet and engage with company management in an open and constructive manner in order to understand the issues and raise our concerns
  • Escalation would normally occur if a request goes unanswered or is inadequately addressed. An internal mechanism has been adopted for escalating engagement in the event of a company’s unwillingness to respond or engage
  • Typically we engage with companies via written communication, allowing approximately 30 days for a response; after which a written reminder will be sent
  • Where no response thereafter is forthcoming, the usual method of escalating contact with investee companies is via senior management; the Chief Executive (for strategic and operational matters) or the Chairman and Senior Independent Non-executive Director (for governance and other issues)
  • Senior CFB/Epworth management, including the Chief Executive Officer, would be available to lead any escalated activity
  • We are willing to share and make our views known when concerns are not fully met, and we actively collaborate with other like-minded investors in the event of an escalated approach
  • We do not subscribe to the view that one size fits all, and a nuanced, case by case approach may be appropriate depending on the circumstances. Our general principle of seeking to escalate via individual or collaborative action is however a fundamental principle of Stewardship

Principle 5: Collective Action

“Institutional investors should be willing to act collectively with other investors where appropriate”

  • We actively seek to partner collaborative initiatives with like-minded investors in particular the Church Investors Group, a collaborative organisation of faith based investors in Britain and Ireland, but also through other groups of responsible investors in the UK and overseas: www.churchinvestorsgroup.org.uk
  • We are willing to co-file and take an active role in the preparation of shareholder resolutions with other investors where these are deemed to be appropriate and in response to material ethical and investment concerns that would otherwise have gone unaddressed
  • We have been active partners in the IIGCC climate coalition (formerly known as ‘Aiming for A’) that seeks material risk disclosure from high-impact companies on climate change resilience
  • The CFB and Epworth are signatory participants in a number of investor coalition initiatives that support collaborative action on material ESG (environmental, social and governance) risk. These include:
    • Access to Medicines Index (ATMI)
    • Access to Nutrition Index (ATNI)
    • Business Benchmark on Farm Animal Welfare (BBFAW)
    • Carbon Disclosure Project (including CDP Water and Forest Footprint)
    • Extractives Industry Transparency Initiative (EITI)
    • Institutional Investors Group on Climate Change (IIGCC)
    • Principles of Responsible Investment (PRI)
    • Workplace Disclosure Initiative (WDI)
    • Members of the UK Sustainable Investment & Finance Association (UKSIF)

The Chief Executive of the CFB is the named contact for collaborative engagement

Principle 6: Voting Disclosure

“Institutional investors should have a clear policy on voting and disclosure of voting activity”

  • The CFB and Epworth supports the principle of considered voting, believing that shareholders have a vital role to play in encouraging high standards of corporate governance from the perspective of being long-term investors. We will therefore register and vote proxies at all UK and European meetings in which we have a shareholding
  • A new ‘high-level’ Corporate Governance Policy was published in 2017. We have adopted a policy of voting in support of company management except where proposals are considered to be in breach of UK corporate governance best practice, or are viewed as not being in the economic interests of shareholders As long-term investors we believe a pragmatic approach best fulfils the objective of building shareholder value over time. We will seek to engage pro-actively with companies where either existing corporate governance arrangements or management proposals cause concern. A decision either to abstain or oppose is taken based on the guiding principles set out in our voting template. Specifically we take a strong view on
    • Executive pay
    • Board independence and diversity
    • Climate change laggards
  • The CFB and Epworth actively vote their directly held shares. These are principally domiciled in the UK and Continental Europe
  • Our Corporate Governance proxy voting policy and summary voting template (the latter developed in partnership with other like-minded investors) are published on the website
  • Our summary UK and European proxy voting reports are published electronically each quarter, whilst a full voting record is available on request
  • We have been instrumental in facilitating greater coherence in voting among the British and Irish Christian churches to emphasise the importance we collectively place on sound corporate governance
  • Proxy voting execution is outsourced to an external specialist voting agency. The current agency employed in exercising proxy voting is ISS for our UK and Continental European equity holdings
  • Voting recommendations are based on a Voting Policy Template developed in partnership with other churches and executed by ISS. Voting outcomes are monitored closely to ensure they are appropriate and comply with the Policy Template. Voting decisions can be manually over ridden if required
  • In accordance with their policies, the CFB and Epworth do not arrange stock lending and recall

Principle 7: Periodic Reporting

“Institutional investors should report periodically on their stewardship and voting activities”

  • We report to clients on our investment and Stewardship activities on a quarterly basis. As well as the required financial performance and Fund activity reports, this includes detailed coverage of our ethical and responsible investment engagement work on behalf of clients
  • Each quarterly report provides an informed roundup of the main areas for engagement during the period and any outcomes and would normally include disclosure on
    • Climate change
    • Extractives industries including oil & gas and mining
    • Engagement initiatives
    • Corporate governance proxy voting
    • Other collaborative initiatives, principally via the Church Investors Group
  • An Annual Report is published of the work of the CFB. In addition, JACEI reports annually to the governing body of the Methodist Church (the Methodist Conference), and this contains an assessment of whether the CFB has managed the Funds under its control in accordance with the aims of the Methodist Church. These annual reports are available to all CFB and Epworth clients and are publicly available online. Each Annual Report includes detailed disclosure on
    • Position Papers and Policy Statements in development
    • Engagement on significant Stewardship (ethical investment) issues
    • The role, function and membership of the Committee
    • Named contacts
  • Annual Reports of the Funds managed by Epworth are freely available from the Epworth website as are quarterly ethical and responsible investment and summary voting reports, and copies of the Funds’ policies
  • The Joint Advisory Committee on the Ethics of Investment (JACEI) was established in 1983 by a Resolution of the Methodist Conference to provide a mechanism for the Methodist Church to tackle ethical dilemmas and to report annually. Its Terms of Reference, Procedures and membership are published annually in the JACEI Annual Report.
  • JACEI draws its membership from CFB Council and the Methodist Council and provides independent external oversight of all CFB and Epworth Stewardship policies, processes and procedures, consistent with current best practice
  • JACEI serves as the CFB’s independent assurance function and its Annual Report serves as the document of record and accountability of all the CFB’s Stewardship interventions.
  • Given the strong focus on Stewardship within and across the CFB and Epworth, we believe JACEI provides the appropriate and relevant external oversight commensurate with our being accountable to the Methodist Church.

Our Stewardship activities are an integral part of how we manage our Funds on behalf of the Methodist Church and our Epworth clients. These activities are fully integrated into our operating compliance procedures and reporting lines through the Church and to Epworth clients.

This Statement has been endorsed by the CFB Council and the Epworth Board.

February 2018

Montreal Pledge Disclosure

Epworth Investment Management (‘Epworth’) has long recognised the challenges posed by global climate change. To help direct its selection of investments, in 2009 Epworth adopted a climate change policy, which has since been supplemented with two further policies: electricity generation; and different fuel types. The fundamental aim of these policies is to ensure that companies in which Epworth invests are consistent with a target of reducing the UK’s greenhouse gas emissions by 80% from 1990 levels by 2050, and limiting increases in global temperatures to 2°C.

One of the guidelines provided by Epworth policy on climate change is: “To create and manage portfolios with a carbon footprint that is relatively low and measurably declining”. As a result since 2015, Epworth has commissioned an annual carbon footprint analysis of the UK portion of its Affirmative Equity Fund for Charities (AEFC) from Trucost, and signed up to the Montréal Carbon Pledge committing to a voluntary disclosure of the results. All the data in this report are to 28 February 2017.


Trucost estimates the total greenhouse gas emissions of each company within the portfolio and the relevant benchmark, estimating both the portfolio’s proportionate share of each company’s emissions, and that of the benchmark. These emissions are then summed to provide the total greenhouse gas emissions of the portfolio (in tonnes of CO2 equivalent (tCO2-e) per million pounds of market capitalisation) and for the benchmark. More details of Trucost’s methodology can be found on its website: www.trucost.com


According to the Trucost analysis, at 28 February 2017 the carbon footprint of the UK portion of the Affirmative Equity Fund for Charities was 270tCO2-e per million pounds of market capitalisation. This was 3.0% lower than its relevant benchmark, the FTSE All Share Index at the same date.

The main reasons for the outperformance were that in more polluting sectors such as utilities and basic resources the Epworth portfolio was significantly less intensive than the overall stock market. Interestingly the tobacco and alcohol sectors act to reduce the carbon intensity of the market. Despite excluding these relatively ‘clean’ sectors on other ethical criterion, the Affirmative Equity Fund for Charities has a lower carbon intensity than the market as a whole.

The change in the Affirmative Equity Fund for Charities footprint is estimated by dividing the total carbon footprint of the Fund (measured in tCO2-e) by the number of units in the Fund; this compensates for changes in size of the Fund due to inflows/outflows and movements in market values. The table below compares the total footprint of the fund, the number of units and the trend in emissions per unit.

AEFC total emissions (tCO2-e)AEFC units in issue“Emissions per unit (kg per unit)”

This would suggest that the carbon intensity of the portfolio fell by 12.6% between 2016 and 2017.

The analysis is based on the UK portion of the Affirmative Equity Fund for Charities, which comprised £68.63m as at 28 February 2017.

Continuing the work

In line with the aims of its policy on climate change, Epworth seeks to continue to reduce its portfolio carbon footprint through the prioritisation of good environmental performance as a factor in investment decisions. Epworth is also working to persuade all companies that are heavy users of fossil fuels to reduce their carbon footprints through initiatives such as ‘Aiming for A’ and the ‘CDP Climate Change Program’. In addition, climate change issues have been integrated into Epworth voting practice which means that we will oppose the re-election of the Chair or members of appropriate board committees if a high-carbon footprint company is failing to improve its emissions performance.

For further information on Epworth’s work on climate change or to feedback on these results please contact us.