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.
“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.”
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.
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.”
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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.
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.
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.
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.
“Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities”
Our detailed position papers and policies are published on our two websites: www.cfbmethodistchurch.org.uk/ethics, www.epworthinvestment.co.uk/investment-approach/ethical-policy-and-guidance/
“Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed”.
“Institutional investors should monitor their investee companies”
“Institutional investors should establish clear guidelines on when and how they will escalate their Stewardship activities.”
“Institutional investors should be willing to act collectively with other investors where appropriate”
The Chief Executive of the CFB is the named contact for collaborative engagement
“Institutional investors should have a clear policy on voting and disclosure of voting activity”
“Institutional investors should report periodically on their stewardship and voting activities”
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.
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.
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.
Epworth is a PRI Signatory and takes its obligations seriously.
The PRI is the world’s leading proponent of responsible investment.
It works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole.
The PRI is truly independent. It encourages investors to use responsible investment to enhance returns and better manage risks, but does not operate for its own profit; it engages with global policymakers but is not associated with any government; it is supported by, but not part of, the United Nations.
For more information go to https://www.unpri.org.
A short film highlighting and explaining some of the important work undertaken by the Joint Advisory Comittee on the Ethics of Investment, the Central Finance Board of the Methodist Church and Epworth Investment Management in considering the ethics of investment.