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 issueEmissions per unit (kg per unit)
2011149,21222,182,7236.73
2012112,91420,749,7965.44
2013115,59821,066,6225.48
2014127,19219,406,2096.55
2015123,81920,027,5886.18
2016114,24321,096,0085.42
201794,63019,921,0154.75
201896,31719,909,1974.84

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

 

Socially Responsible Investment Review September 2024

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

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:

  1. Have the company decarbonise its asset mix in response to the climate crisis.
  2. Better understand the company’s approach to phasing out thermal coal and encourage the company to make a responsible exit from the sector.
  3. 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.