Interactive Investor

Church of England puts 20% of its pension fund into climate change investments  

4th February 2020 11:32

Tom Bailey from interactive investor


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Named the FTSE TPI Climate Transition Index, the Church will invest an initial £600 million of its clergy’s £2.8 billion retirement savings pot.

The Church of England is launching its own custom passive index to invest its pension savings in.

The new index, created in collaboration with FTSE Russell and the Transition Pathway Initiative (TPI), part of the London School of Economics’ Grantham Research Institute, aims to capture company alignment to the Paris Climate Agreement.

Named the FTSE TPI Climate Transition Index, the Church will invest an initial £600 million of its clergy’s £2.8 billion retirement savings pot.

According to the Church, the index will favour companies with targets aligned the Paris Agreement on climate change. Those that do not have such targets will either be unweighted or excluded.

However, FTSE TPI Climate Transition Index will not exclude all fossil fuel companies, at least for now. For example, Shell and Repsol are included in the index whilst ExxonMobil, Chevron and BP are not. According to the Church: “Were the latter companies to set emissions targets covering all their emissions that align to the Paris Agreement then the Index rules would allow inclusion.”

Rather than exclude all companies in the energy sector, the index “recognises that there is a path for an oil and gas company to transition in line with the Paris Agreement.”

The new index, the Church says, will mean that the Pensions Board portfolio will have 49.1% lower carbon intensity than it currently has in its passive allocation.

Adam Matthews, director of ethics and engagement for the Church of England Pensions Board & co-chair of the Transition Pathway Initiative (TPI), says the move comes following outgoing Bank of England governor Mark Carney’s call for companies to consider so-called “climate risk.”

Matthews says: “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 interests of beneficiaries and wider society, and be excluded.”

Justin Welby, archbishop of Canterbury, commented: “We all have both a moral and financial responsibility to address the climate emergency and to use those tools available to us to support the goals of the Paris Climate Agreement.”

The Church of England has already had a policy to exclude investments in companies in certain sectors, such as weaponry, tobacco, gambling, and high interest rate lending.

This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.

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