Church Commissioners’ carbon footprint surges 77% over five years

Church investor cites active management and carbon intensity of benchmark

The Church Commissioners, the £8.2bn (€9.3bn) investment arm of the Church of England that is at the forefront of a global investor push against high emitting companies, has seen its own carbon footprint surge over the past five years.

The carbon footprint of the body’s public equities portfolio has risen to 344 tonnes of ‘carbon dioxide equivalent’ (‘tCO2e’) per £1m of corporate revenue at the end of 2018 – up from just 194 tCO2e in 2014 – an increase of 77%. The Commissioners are chaired by Archbishop of Canterbury Justin Welby.

And the footprint, which is based on data from Trucost, the S&P subsidiary, is also outpacing the carbon intensity of the Church Commissioners’ own blended UK/ global listed equities benchmark. The 344 tCO2e figure compares to the benchmark’s 275 tCO2e.

Back in 2014, the investor’s 194 tCO2e number compared favourably with the benchmark’s figure of 249 tCO2e, according to figures contained in the Church Commissioners’ new annual report.

By contrast, Dutch giant PGGM has cut its CO2 footprint from 339 tonnes of CO2 per million dollars of company turnover to 239 tonnes of CO2 per million dollars by the end of 2018.

A Church spokesperson told RI that there were three reasons for the rise in the carbon footprint.

The first was that the carbon intensity of the benchmark has increased.

“The second factor is that we are heavily biased towards active management now so there will be fluctuations due to the investment decisions of our asset managers,” the spokesperson added.

The third contributory factor was an investment last year in a specialist utilities fund with heavy exposure to electricity utilities, which are carbon intensive.

He said the number of companies in an index that have very high carbon footprints is small, so even small changes in portfolio positioning can have big impacts.

“To put some of this in perspective – as of January 31 2019 our footprint fell to 268 (a 23% fall from the month before). This left us slightly ahead of both our blended benchmark (259) and the AC World (266) [a reference to the MSCI ACWI index].”The Church’s policy on climate change in the coming years will be to put companies that are not aligning with the transition to a low carbon economy on its restricted list. “We expect this to lead to reductions in our carbon footprint from FY 2020 onwards,” the spokesperson added.

The Church report states: “Holdings in three electric utilities companies account for just under one third of our portfolio’s total emissions and more than account for the excess carbon footprint compared to the benchmark.” The Church declined to name these companies to RI.

“There will be fluctuations due to the investment decisions of our asset managers”

Meanwhile, the smaller United Reformed Church has voted to divest from fossil fuels.

The URC unanimously approved a proposal to sell its investments in fossil fuel companies at a meeting of its governing body.

The resolution was brought by the URC Synod of Scotland, which dropped its own fossil fuel investments in 2015.

It states that the URC should divest from companies involved in the extraction or supply of oil and gas by the time of its General Assembly in 2020, following divestment from coal and tar sands in 2015.

A proposal from the URC’s Investment Committee, to divest from fossil fuel companies that have not achieved “clear progress toward developing their business” to align with the Paris Agreement by the end of 2020, was rejected.

The United Reformed Church holds £100m worth of equity investments; an estimated 4% of the URC Trust’s £50m fund is invested in the fossil fuel industry.