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Church of England invests £600m towards net zero emissions

by Michael Ford last modified 31 Jan, 2020 12:11 PM

Bishop Nicholas was at the Stock Exchange when the Church of England announced its Pension Board would be investing £600 million in global new stock index backing the Paris Climate Agreement.

Church of England invests £600m towards net zero emissions

Original photo of Adam Matthews at the launch courtesy TPI

The Paris Agreement's central aim is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels, and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius.

The new Global Index will enable pension fund managers to invest in companies who are onboard with the Paris Agreement. It will reward those companies with public targets aligned to the Agreement, whilst significantly underweighting or excluding those that do not.

This new generation of Index has been developed by the Church of England Pensions Board, in collaboration with FTSE Russell and the Transition Pathway Initiative (TPI) which tracks whether companies align to 2DC or below 2DC/Net Zero.

The TPI is a global initiative led by asset owners and supported by asset managers. Aimed at investors and free to use, the TPI assesses how individual companies are positioning themselves for the transition to a low-carbon economy through a public, transparent online tool.

The development of the Global Index has been an important project of the Church of England Pensions Board over the past 18 months as it seeks to integrate TPI insights into its own passive investments.

Under the index, the Pensions Board portfolio will have a 49.1% lower carbon intensity than its current passive allocation.

The Index results in changes to some key holdings across a range of high impact emissions sectors – for example in Oil and Gas, where there has been less progress on alignment with the Paris goals.

So for example, in the Oil & Gas sector, and based on TPI assessments, Shell, who set emissions targets covering all their emissions that align to the Paris Agreement, included in the index whilst ExxonMobil, Chevron and BP are not.

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.

“For Christians and people of conscience, this is even more so when you see the impacts on the world’s poorest and least equipped to adapt to extreme weather, as well as the impacts on the beauty of God’s creation.

“Today’s launch and commitment of £600 million by the Church of England Pensions Board is world leading in not only embedding the insights of the Transition Pathway Initiative (TPI), that the Church co-chairs with the Environment Agency Pension Fund, but in demonstrating that it is possible to act, to take leadership and in doing so challenge the market that is currently aligned to a world of 3.8 degrees of warming.

“I congratulate the Board and all those involved in this unique and industry leading partnership and invite other Pension Funds to work with us in advance of the UN Glasgow Climate Conference later this year.”

At the launch, the Church of England Pensions Board issued an open invitation to other pension funds to consider this approach.

Adam Matthews, Director of Ethics and Engagement for the Church of England Pensions Board & Co-Chair of TPI said:

“Last month Governor Mark Carney challenged people to ask what their pension funds are doing to address the financial risks of climate change. Working over the past 18 months we have developed an answer that enables passive investors to play their part in supporting the goals of the Paris Climate Agreement.

“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.

“The Church of England Pensions Board will no longer be invested in several household names in the oil industry. The Index leaves open a path for any one of these excluded companies to transition in line with the Paris Agreement and claim their place in the index at a later date.”

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