James Corah: the Church Needs Finance, but Finance Also Needs the Church

This article is an edited version of the keynote speech delivered at the Church of Scotland’s Good Money Week Event. All views should be considered to be those of the author rather than the organizations he represents.

During this first Good Money Week I want to explore why I believe that the investment activities conducted by churches are examples of Good Money in action.
In so doing I will make three points.
First, the church needs finance. It has resourcing requirements and, whilst investment can be seen as being distinct to normal activities, the church needs the returns that participation in the investment markets brings.
Second, I want to acknowledge how the church has put money to the side of its activities and the negative consequences that occur when financial activities can be seen to of disjointed from the rest of the church.
Finally, I want to show how, even within the constraints of investing in a way that maximises returns, church investors can and do seek to connect their activities with the faith that they fund.
So, to begin; churches need finance.
As I am sure that you are all aware running a Church is expensive. Inconveniently, we have been blessed with architecturally stunning, but in many ways impractical and costly buildings, and we need to maintain networks in every community. This costs money; the Church of England, as the most striking example, needs to generate an annual income of over £1 billion every year to continue in its current form.
You will not be surprised to learn that the majority of this income, over 50%, comes from congregational giving. But you may be surprised that the second largest amount 24%, around £240m, comes from investment returns. Whilst this data is derived from the particular context of the Church of England, the importance of investment income is shared by most of our major church institutions. Whether it be endowment, charitable, or pension assets investors are relied upon to fund a significant proportion of the church’s activity. Due to the church’s financial need, every penny of investment returns count.
This has a significant effect on how churches manage their money. Coupled with laws around fiduciary duty, and the obligations placed upon charities from regulators regarding the need to take only appropriate levels of risk, church investors are pushed, predominantly, into the conventional investment asset classes. It is why household names such as Vodafone, BP, Sage Group, Smith and Nephew, HSBC and Barclays, for example, are amongst the most common church investor holdings.But I am not going to say that church investors should apologise for investing in this way; financing the Church is their biggest contribution. Collectively the members of the Church Investors Group (CIG) manage investment assets of £15bn. This is a great responsibility and something that they do well and with great skill. The Church needs their work. Maximising returns to fund the church’s more spiritual activities is their principle job – it is making money to fund good works. They have to invest in the way that they do.
But I am going to acknowledge that investments in large-cap multinational companies are, of course, frustrating to some people in the Church. These would rather see the Churches assets in more ‘positive’ investments. The vast majority agree that church investors play an important role in funding the good works of the Church, but many will be asking how can I talk about Vodafone and BP, for example, as being an example of ‘Good Money’ in practice?
This brings me onto my second point; there is clearly a gap between what the church says and how the church invests its money. This can cause problems for the Church and, as we experienced through the summer of 2013, lead to it making headline news. For me, the propensity for church investors to hit the front pages is the symptom of two underlying problems in how we, as churches, look at money.
To understand the first problem we have to briefly dip into the abstract and think about what makes a religion a religion. When writing my PhD on church funding I was greatly influenced by the writings of Durkheim. He stated that a religion can only be seen as being a religion if its teaching and activity is different to the everyday experience of the majority of the population. To rephrase, something is only sacred if it is not part of the everyday secular world.
This creates a problem when you, as a religious institution, have to raise money, the ultimate secular activity, to continue to operate.
To save ourselves from this embarrassment and the potential contamination of our religiosity, collectively, we have pushed money to the side of the Church. Cut it off from our, core, central activities. For example, at a local level many churches make it the sole responsibility of the treasurer to maintain the finances. The same thing happens at the investment level where we have created separate investment bodies, slightly distanced from, and working to, different priorities from the Church itself.
Whilst I wouldn’t want to argue that this structure is without any benefit, I do believe that by separating money from the faith we have created more problems than we have solved and we have to close this gap.

The second problem is the prevalent conception that church investors should, and can, have ‘pure’ investment portfolios.
It is true that the Church is always going to, and always should have, areas where it does not invest. There are activities that are so contradictory to church values that we cannot have church money allocated to them. However, the Church is unique in the institutional ethical investment world; for instance whereas charities tend to be single issue organizations, and thus can better identify the activities that contradict their aims. Churches, in contrast, say something about everything. This means that there are at least 101 different answers to the question – what is the worst thing the Church could invest in?
As a consequence each and every church investing body has to carefully think through and prioritise what the worst things are for them. Bearing in mind our denominational differences, consensus on the worst of the worst today rests around the traditional sin stocks; arms, gambling, pornography, alcohol, tobacco, and activities that threaten the sanctity of life. More recently though we have seen churches join other investors in screening out companies that do not comply with internationally agreed norms (such as ILO core labour standards, the Universal Declaration of Human Rights and the disclosure of carbon emissions), and high interest rate lending. But this is not an exhaustive list of corporate ills and it does mean that, no matter what policies are adopted, the church is going to find itself invested in problematic activity.
This brings me on to the third, and final, part of my text; why I think, despite the above, Church investment, as practiced by many of our members, is an example of good money in action.
Counter intuitively, I actually believe that it is through the impossibility of having a clean portfolio that church investors can, and do, have the biggest Christian impact. By combining church values with investment holdings church investors are able to press companies for change. This is called engagement and it can create a positive change without having a detrimental impact on much needed funding.
The Church Investors Group, for instance, plays a key role in this regard by bringing investors, from the different denominations, together to focus, collectively, on the issues that matter to them. This accentuates the impact of our collective investment holdings and, more importantly, our voice in a way that makes it most productive.
One example of this work relates to hotel groups. Building on steps that international church groups had taken in their own home markets we took forward our members’ concerns that hotel facilities could, unbeknown and un-condoned by the company that operates them, be used for the purpose of child sex trafficking.Following the two-year long engagement the companies conducted risk audits, consulted expert groups and put in place training for franchise holders and staff. Church investors had, collectively, made a difference on an issue that matters.
This work is unique in the finance sector. Very few other investors are able to talk to companies about values based issues.

The other thing that church investors can, and do, do is take a bigger view. The church is here for everyone, forever, and this means that we can engage with companies across the board on what is best for the common good.
Despite the ongoing campaigns it will come as no surprise that I, personally, do not believe in the immediate divestment from all fossil fuel companies at this point. But that does not mean that I think that church investors don’t have a pressing obligation and duty to take a key role in the transition to a low carbon economy. Climate change is one area that we have to improve the standards of companies collectively. For this reason the Church Investors Group runs a UK market wide engagement programme that uses the Carbon Disclosure Project to identify companies that fall below the standards of their peers on the management of greenhouse gas emissions. In 2013 our assessment of companies identified 53 such laggards for our engagement and by the end of the year 73% of them had, in some way or other, increased their CDP score. Furthermore, the University of Edinburgh tested the efficacy of our work; identifying, with a 90% confidence rate, that this rise in standards was solely due to the CIG’s work.
The church’s values push church investors to go further than their peers.
In conclusion, church investors invest to fund the church. But whilst this means that they have to work in a manner reminiscent to that of other, more mainstream, investors this activity should not be considered in isolation of the church itself. Instead, the integration of church values, seeing investment as a part of the church, has brought many advantages. It has driven improvements in business behaviour and promoted better operating standards. Whilst it is something other investors are unable to do in the same way, it is something all will benefit from in the long term. For me, it is why finance needs the Church.
I believe that this is good money in action.

This article was first published by the St. Paul’s Institute.

Dr. James Corah is Deputy Head of Ethical and Responsible Investment with specific responsibilities for corporate governance and ethics at CCLA Investment Management. He is also Secretary to the Church Investors Group.