January 30, 2020 / 11:46 AM / 18 days ago

Church of England pension fund shifts $789 million to climate index

LONDON (Reuters) - The Church of England’s pension fund has shifted 600 million pounds ($789 million) into a new equity index that invests in companies deemed to be making progress towards the targets of the Paris climate agreement.

FILE PHOTO: A cyclist is reflected in a puddle as he passes Westminster Abbey in London January 17, 2014. REUTERS/Luke MacGregor

The index, created by FTSE Russell, includes oil producers Royal Dutch Shell and Repsol, but not others such as BP, Exxon Mobil and Chevron.

The move comes a month after Bank of England governor Mark Carney said the financial services sector had been too slow to cut investments in fossil fuels.

“(Carney) challenged people to ask what their pension funds are doing to address the financial risks of climate change,” said Adam Matthews, Co-Chair of the Initiative and Director of Ethics and Engagement for the Church of England Pensions Board.

“The message is clear to all publicly listed companies: put in place targets and strategies aligned to Paris and be rewarded with inclusion in the Index or work against the long term of interests of beneficiaries and wider society and be excluded.”

The Church’s 2.8-billion-pound pension fund said the 600 million pounds represented its entire passive equity portfolio of investments, which track indexes rather than relying on fund managers to pick stocks to put money into.

The Church has been active in pressuring oil producers to improve their climate targets, taking part in shareholder resolutions at companies including Repsol.

It has also faced criticism in the past for investing in companies perceived by some campaigners as unethical. In 2018, the Church said it would keep its investment in Amazon, despite the Church’s leader Justin Welby criticizing the U.S. online retailer for paying low levels of taxes in Britain.

The climate index is based on the London School of Economics’ Transition Pathway Initiative (TPI), which assesses companies’ alignment with the Paris agreement’s goal to keep global warming below 2 degrees Celsius.

“Under the index, the Pensions Board portfolio will have a 49.1% lower carbon intensity than its current passive allocation,” the Church said in a statement, referring to a measure of carbon emissions to revenues.

“Were the latter companies (ExxonMobil, Chevron and BP) to set emissions targets covering all their emissions that align to the Paris Agreement then the Index rules would allow inclusion.”

Exxon and Chevron are among firms whose climate policies are likely to be challenged by shareholders at upcoming annual general meetings.

Oil companies’ climate targets vary - for example in whether they include emissions resulting from the use of their products rather than merely their own operations.

($1 = 0.7608 pounds)

Reporting by Shadia Nasralla and Simon Jessop; Editing by Mark Potter

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