Montréal Pledge Disclosure

07 Apr 2025
admin
Ethics, Reports and Reviews
Comments Off on Montréal Pledge Disclosure

1. Climate Change

Montréal Pledge Disclosure

The Central Finance Board of the Methodist Church has long recognised the challenges posed by global climate change. To help direct its selection of investments, in 2009 the CFB adopted a climate change policy, which has since been supplemented with two further policies: electricity generation; and different fuel types. The fundamental aim of these policies is to ensure that companies in which the CFB invests are consistent with a target of reducing the UK’s greenhouse gas emissions by 80% from 1990 levels by 2050, and limiting increases in global temperatures to 2℃.

One of the guidelines provided by the CFB policy on climate change is: “To create and manage portfolios with a carbon footprint that is relatively low and measurably declining”. As a result since 2009, the CFB has commissioned an annual carbon footprint analysis of its UK Equity Fund from Trucost, and has signed up to the Montréal Carbon Pledge committing to a voluntary disclosure of the results. All the data in this report are to 28 February 2018, the CFB’s year end.

Methodology

Trucost estimates the total greenhouse gas emissions of each company within the portfolio and the relevant benchmark, estimating both the portfolio’s proportionate share of each company’s emissions, and that of the benchmark. These emissions are then summed to provide the total greenhouse gas emissions of the portfolio (in tonnes of CO₂ equivalent (tCO₂-e) per million pounds of market capitalisation) and for the benchmark. More details of Trucost’s methodology can be found on its website: www.trucost.com

Results

According to the Trucost analysis, at 28 February 2018 the CFB’s carbon footprint was 288tCO₂-e per million pounds of market capitalisation compared to 290tCO₂-e for the FTSE All Share – a difference of 0.6%. The ‘gap’ between the Fund and the market has significantly narrowed owing to relative reductions in carbon intensity across the market generally.

The CFB UK Equity Fund is significantly less carbon intense than the overall UK stock market in the materials (mining and chemicals) and utilities sectors, and significantly more intensive in the food, beverage and tobacco sector, and that of transportation.

The change in the CFB UK Equity Fund’s footprint is estimated by dividing the total carbon footprint of the Fund (measured in tCO₂-e) by the number of units in the Fund; this compensates for changes in size of the Fund due to inflows/outflows and movements in market values. The table below compares the total footprint of the fund, the number of units and the trend in emissions per unit.

	CFB total emissions (tCO₂-e)	CFB units in issue	Emissions per unit (kg per unit)
2011	149,212	22,182,723	6.73
2012	112,914	20,749,796	5.44
2013	115,598	21,066,622	5.48
2014	127,192	19,406,209	6.55
2015	123,819	20,027,588	6.18
2016	114,243	21,096,008	5.42
2017	94,630	19,921,015	4.75
2018	96,317	19,909,197	4.84

This would suggest that the carbon intensity of the portfolio has increased by 1.8% between 2017 and 2018, having fallen by 12.4% the year before. Since 2009, the carbon intensity of the portfolio has fallen by 3.4% p.a.

The analysis is based on the direct holdings of the CFB UK Equity Fund, which comprised £333.9m as at 28 February 2018.

Continuing the work

In line with the aims of its policy on climate change, the CFB seeks to continue to reduce its portfolio carbon footprint through the prioritisation of good environmental performance as a factor in investment decisions. The CFB is also working to persuade all companies that are heavy users of fossil fuels to reduce their carbon footprints through initiatives such as the ‘Transition Pathway Initiative’, the ‘CDP Climate Change Program’ and the ‘IIGCC Climate Solutions Program’.

In addition, climate change issues have been integrated into CFB voting practice which means that we will oppose the re-election of the Chair or members of appropriate board committees if a high-carbon footprint company is failing to improve its emissions performance. Extreme poor disclosure on climate change risk may also result in our voting to oppose the adoption of the Annual Report & Accounts.

For further information on the CFB’s work on climate change or to feedback on these results please contact Christophe Borysiewicz at christophe.borysiewicz@cfbmethodistchurch.org.uk

October 2018

The Climate Emergency and the Oil and Gas Sector

1. Climate Change

The climate emergency and the oil and gas sector

The Central Finance Board of the Methodist Church has sold holdings in its funds in all oil and gas companies on climate emergency grounds. We have also excluded a further 11 companies from any future investment.

The divestments and exclusions are the result of new CFB analysis of fifteen fossil fuel companies and the advice we have received from the Joint Advisory Committee on the Ethics of Investment (JACEI).

JACEI was established almost 30 years ago to advise the CFB on ethical aspects of investments and proposed investments. It reports annually to the Methodist Conference.

The work was prompted by a memorial and reply received by the Methodist Conference in 2017. JACEI was asked to look at the extent to which the business investment plans of oil and gas companies were aligned with the Paris Agreement to keep temperature rises below 2°C and to review the divestment criteria. The JACEI report on this work to Methodist Conference 2020 and 2021 (as well as its annual report) is available on the CFB website.

The CFB has factored global warming into its investment approach for over a decade, because we are deeply concerned about the risks to the planet. We have long excluded a range of oil and gas and mining companies from our portfolios because they extract coal or tar sands, or are focused on finding new supplies of oil and gas. We also run an extensive engagement programme to encourage companies to do more to respond to the climate emergency, including co-filing shareholder resolutions.

A report from JACEI on the methodology for responding to the Conference memorial and reply was received by Conference in 2018. JACEI advised that companies should be assessed under five categories: asset mix, capital expenditure, strategy and governance, contributions to a positive transition, and track records and targets related to reducing carbon emissions.

The CFB assessed companies against up to 25 different metrics and gave them a ‘traffic light’ rating. When JACEI reviewed the assessment, it recommended that companies rated red or amber should be excluded from investment on ethical grounds.

Most recently, the CFB have sold its remaining company holdings in the oil and gas sector, including Royal Dutch Shell. This follows advice received from JACEI in April 2021, that no companies in the sector are currently aligned with the climate change targets set out by the 2015 Paris Accord.

Revd Dr Stephen Wigley, Chair of JACEI, commented:

“The Committee has determined that the slow pace of corporate change means that the oil and gas sector is failing to meet the targets set by the Paris Accord. Shell, along with its peers, is currently failing to play a substantial enough role in addressing the climate emergency.”

David Palmer, Chief Executive, commented:

“The CFB and Epworth have long been committed to engaging with companies around issues that negatively impact the poor and God’s creation. The pace of change across the oil and gas sector has been inadequate and we welcome the recommendation of JACEI to disinvest.”

Socially Responsible Investment Review September 2024

Stewardship Code

During the quarter we received confirmation that our FRC Stewardship Code submission was approved, and we remain signatories for another year. The theme this year was ’50 years of better’, recognising the significance of the heritage that the CFB and Epworth have in ethical investing. Our latest report can be found here

Nestlé

Following on from our voting pre-declaration on Nestle regarding healthy foods, we had an opportunity to meet with the company and ask questions of the approach. The resolution was defeated overall, despite ours and other investors’ support for it. From the meeting, we were pleased that Nestle has committed to a target that is meaningful and are committed to growing the nutritious side of the portfolio.

During the Nestle meeting, we also had the opportunity to discuss the implementation of the EU deforestation law which comes into effect from Q4 2024. The European Commission describes it as: ‘Under the Regulation, any operator or trader who places these commodities on the EU market, or exports from it, must be able to prove that the products do not originate from recently deforested land or have contributed to forest degradation.’ We can see the case where there may be unintended consequences to this regulation with the EU having ‘deforestation free’ commodities, and outside the EU products still having deforestation within the supply chain. Nestle noted its own zero-deforestation commitment for many commodities by 2022, and for cocoa and coffee by 2025, and its approach to supporting affected farmers.

Share Action – Ethnicity Pay Gap

In August, we were able to meet with Cranswick as part of a ShareAction initiative to discuss ethnicity pay gap reporting. This is the first time that Epworth has been involved in the call, although the coalition had met with the company before. The coalition had decided to focus on engaging food producers as the sector often has lower paid workers from season schemes. It was useful to understand some of the complications of gathering ethnicity data from the company, recognising that not everyone has access to the same technologies that make reporting easier. It was also good to challenge the company on its ethnicity within its senior management team and learn about future plans.