Ethics

Socially responsible investment review
June 2009

Climate Change

We continue to develop our investment approach to Climate Change. A position paper has been produced, based on the new Methodist report Hope in God’s future. A policy statement describing how we will incorporate Climate Change concerns in our portfolios is now being drafted. Work continues in attempting to measure the carbon footprint of our UK portfolios.

As members of the Institutional Investors Group on Climate Change (IIGCC) we will be signing a statement ahead of the inter-governmental Climate Change summit in Copenhagen in the autumn calling on governments to take further steps towards creating a framework for a low carbon economy and stressing the urgent need for a global agreement.

It has been gratifying to see that an increasing number of companies are participating in the Carbon Disclosure Project. We will continue to support CDP by writing to companies that have not participated in the 2009 survey. Obtaining information about a company’s carbon emissions is an important first step to incorporating this important issue into the portfolio management process.

Executive Remuneration

Executive remuneration is seen as a contributing factor to the financial crisis. Companies still adopt policies which do not meet reasonable criteria in linking pay to performance or ensure it is not unduly excessive. Policies have also been ignored if targets are not met. For example Royal Dutch Shell failed to meet a target and the remuneration committee decided to award executives half of what they would have been awarded if they had met the criteria. The CFB voted against the remuneration policy at the AGM.

BP

We met with BP to discuss health and safety issues and its investment in alternative energy. We are encouraged by how its new risk-based management system is being rolled out across the group. The company explained how it was focusing its approach to alternative energy.

Arcelor Mittal

We met with the European steel and mining company Arcelor Mittal for the first time. We have been concerned particularly with health and safety issues in mines the company operates in Kazakhstan, where there was a large fatal accident in 2008. The company stated that despite declining capital expenditure linked to the global downturn, it was maintaining health and safety spending. There were particular challenges when integrating former Communist state-owned mining operations.

Overall we were reassured with the level of commitment expressed by the company in the face of huge challenges, but will keep it under regular review.

Nestlé

A meeting was held with Nestlé as part of our regular engagement programme. Subjects discussed included the marketing of breast milk substitutes, child labour on cocoa plantations and child obesity. A further meeting with senior executives through CIG has been arranged for December.

Companies with military exposure

Alcatel Lucent, a French telecommunications equipment company, sold its stake in Thales, which sells military hardware. Military sales now form a minimal part of Alcatel Lucent’s total sales and JACEI advised there should be no ethical bar to investment.

Barclays

We met with Barclays chief executive John Varley with other members of the Church Investors Group. It provided an opportunity for members to understand better how a major bank is run. Questions were asked about risk management, bonus cultures, responsible lending, and mortgage foreclosures.

Children’s Issues

The position paper, Issues Involving Children has now been approved.

A policy statement has been drafted based on the paper which it is hoped will be approved in the autumn.

Church Investors Group

The Church Investors Group met in June where the work produced to date on a Christian approach to executive remuneration was discussed. It was agreed that further work would be done over the next few months in an attempt to draw out appropriate principles for Church investment bodies.

A trustee training day has been arranged. It will take place on 1 October in London with a keynote speech by the Bishop of London.

Advisory Committee annual report

Methodist Conference received the JACEI 2009 Report to Conference including its conclusion that ‘The Committee judges that the CFB has managed the funds under its control in accordance with the aims of the Methodist Church. The report, together with a short leaflet reflecting on JACEI’s work over the past year is available.