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.

Socially Responsible Investment Review June 2024

Nature Action 100

Epworth is a signatory of Nature Action 100; a global investor- led engagement initiative focused on supporting greater corporate ambition and action to reverse nature and biodiversity loss. Epworth, along with other institutional investors, is engaging directly with Johnson and Johnson, Anglo American, and The Home Depot.

Nature Action has six investor expectations of companies:

Ambition: Publicly commit to minimize contributions to key drivers of nature loss and to conserve and restore ecosystems at the operational level and throughout the value chain by 2030.
Assessment: Assess and publicly disclose nature-related dependencies, impacts, risks, and opportunities at the operational level and throughout the value chain.
Targets: Set time-bound, context-specific, science-based targets informed by risk assessments on nature-related dependencies, impacts, risks, and opportunities. Disclose annual progress against targets.
Implementation: Develop a company-wide plan on how to achieve targets. The design and implementation of the plan should prioritise rights-based approaches and be developed in collaboration with Indigenous Peoples and local communities when they are affected. Disclose annual progress against the plan.
Governance: Establish Board oversight and disclose management’s role in assessing and managing nature-related dependencies, impacts, risks, and opportunities.
Engagement: Engage with external parties including actors throughout the value chain, trade associations, policy makers, and other stakeholders to create an enabling environment for implementing the plan and achieving targets.

Utilising these investor expectations, the engagement group, including Epworth, began discussions with Johnson & Johnson. We started the conversation around assessment and supplier standards that the company implements, and noted where these dovetail with the biodiversity expectations of investors. Johnson & Johnson were keen to stress their long history of biodiversity efforts, particularly around water management and we look forward to continuing our engagement with the company.

Climate Action 100

During the quarter, Epworth undertook an assessment of our engagement with Climate Action 100+. Epworth has engaged with multinational mining company Anglo American since the initiative started back in 2017. Our original goals for the engagement were to:

Have the company decarbonise its asset mix in response to the climate crisis.
Better understand the company’s approach to phasing out thermal coal and encourage the company to make a responsible exit from the sector.
Push the company to set ambitious, long-term targets to cut scope 1, 2 & 3 emissions in line with the temperature goals of the Paris Agreement.

We believe the company has made excellent strides in the last 7 years across these objectives, although we recognise there is always more to do when it comes to climate. However, we have taken the decision to step down as co-leads for Anglo American.

Socially Responsible Investment Review March 2024

Biodiversity

Thinking around the Climate Emergency and our responsibility to the wider environment has grown in the last few years. Biodiversity has become a focus for investors, with the launch of Nature Action 100 at COP15 in December 2022, and prior to that the Taskforce on Nature-related Financial Disclosures (TNFD) in July 2021. Epworth are signatories to the

Nature Action 100 with three focus companies and will engage with the purpose to reduce the impact of their operations on nature by 2030, through setting specific targets and disclosing annually against them. This builds on the engagement work we have already undertaken with a number of investee companies such as MJ Gleeson and Anglo American on this topic to date.

Tax Justice

Epworth is continuing their engagement with investee companies on the topic of tax justice, promoting the right payment of tax in the right jurisdiction at the right time. Epworth engaged with six new UK companies during the year, as well as following up with two non-responding companies. Epworth has begun an engagement program with its European holdings on the topic of tax transparency. As the Fair Tax Mark has broadened its offering to apply to global companies, Epworth has followed suit and written to seven European headquartered companies.

HSBC

Epworth attended a meeting with the Chief Sustainability Officer of HSBC to learn more about their net zero approach. Given the work undertaken by Andrew Harper to call out HSBC on their coverage of emissions, this was a helpful meeting to further understand the nuance of the financed and facilitated emissions of the bank.

Core portfolio aligned with Epworth’s ethical pillars

Epworth has begun a project to create a universe of core stocks that align with Epworth’s ethical pillars. The project will centre on identifying which of the world’s biggest listed companies can be tied to our pillars, which in addition to helping us achieve our ethical goals, can also help us to continue providing diversified investment portfolios.

Nestlé

Nestlé is subject to a shareholder resolution calling on the company to set time bound targets for increasing the proportion of its sales of healthy products. Epworth has pre-declared its position to vote for the resolution at the company AGM in April. Rev Dr Andrew Harper gave this quote:

“The world is facing a public health emergency stemming from the lack of nutritious food available easily and affordably. Over the past three decades, rates of obesity in children have increased fourfold.

As the world’s largest and most diversified food and beverages company, Nestlé has a clear responsibility to fight this health epidemic, and we believe its published strategy to date does not go far enough. Therefore, we wholeheartedly support this resolution and encourage the company to be braver in its product evolution for the good of both its shareholders and its customers.”

Nestlé has pushed back publicly on the resolution, stating that investors are targeting the wrong company as they already release data on the health composition on their portfolio. They go on to add that it wouldn’t be good for the company to set targets that limit sales of certain products as this would leave room for competitors, providing no public health benefit.