Dr James Corah is Deputy Head of Ethical and Responsible Investment with specific responsibilities for corporate governance and ethics at CCLA Investment Management. CCLA are specialist investment management for charities, faith organisations, and local authorities and invest money for more charities than any other fund manager in the UK. James is also Secretary to the Churches Investment Group (a group of 52 of the largest Church Investors, predominantly based in the UK, who have assets of approximately £15bn), a role that involves promoting ecumenical collaboration and cooperation on ethical investment matters.
Please explain the role the CCLA plays as an investment advisor to charities, faith organisations and local authorities. What’s the mind-set of the Trustees and Investment Committee members you meet – what are they looking for from CCLA and what’s their outlook on divestment at the moment?
CCLA is one of the UK’s largest charity fund managers, in aggregate we manage over £5 billion, and have over 50 years of experience in providing charities, churches, and public sector bodies with competitive and attractive investment management services.
We approach climate change from two perspectives. First, we have always made it a priority to enable our clients to reflect their values in their investments and many of our charity investors, particularly those within our COIF Charities Ethical Investment Fund, feel that they have a moral duty to accelerate the transition to a low carbon economy. Second, we believe that climate change is an important investment consideration and we factor it into how we manage money.
What is CCLA’s position right now on investing in fossil fuel companies? I understand you’ve published a paper recently saying you’ll no longer buy stock in ‘pure play’ coal and tar sands companies.
We see the risk of fossil fuel assets being stranded as a key issue for investors. All equity portfolios, managed by CCLA, do not have any exposure to companies which are predominantly focussed on tar sands production or energy coal and are significantly underweight the diversified oil and gas majors. We also avoid companies with broader unmitigated environmental risks and see this as part of controlling investment risk for investors.
In the management of our multi-asset Investment Funds we also actively look for opportunities that bring our charity investors financial benefits and wider impact. Investments in renewable energy infrastructure, energy efficiency initiatives, sustainable timber and microfinance have acted to further diversify our portfolios and allocate capital to positive social or environmental activities.
CCLA has been championing the engagement approach in getting companies to take on a more ethical and sustainable position – what’s your experience of with how effective this is? How does it sit alongside divestment as a way of influencing change?
Proactive engagement is a significant part of our approach to ethical and responsible investment. This work has brought about significant changes in corporate practice.
We have a longstanding policy of engaging with companies on their disclosure and management of greenhouse gas emissions. Following this work, in 2014, 23 FTSE350 companies managed to achieve significant enough progress to improve their Carbon Disclosure Project (CDP) performance band (that runs from ‘A’ to ‘E’). Furthermore, analysis conducted by the University of Edinburgh has found, to a 95% confidence rate, that improvements we have seen in many FTSE250 constituent companies over the past two years would not have happened without our engagement.
CCLA has also co-ordinated the £160bn collaborative engagement initiative ‘Aiming for A’. This initiative is working with the ten largest UK-listed utilities and extractives companies to help them achieve a high (A) CDP Performance Band; in 2014 five companies improved their score. This project has now moved on to its shareholder resolution phase with supportive, but stretching, resolutions having been co-filed filed at BP and Royal Dutch Shell ahead of their 2015 AGMs. These resolutions aim to play a positive role in amplifying the need to balance the shorter and longer term aspects of shareholder value creation. To this end they are asking the companies to disclose further information about: ongoing greenhouse gas emissions management, portfolio resilience against the International Energy Agency’s 2035 scenarios, low carbon energy R&D, strategic KPIs and executive compensation incentives and public policy work. We are pleased that both companies have requested that all of their shareholders support the proposals and we look forward to continuing our productive engagement with them.