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Wonga, the archbishop and the Ethical Investment Advisory Group: interview

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The day after the archbishop of Canterbury said he would try and compete payday lenders like Wonga “out of existence”, it was revealed that the Church of England invests in the venture capital firm that helped get Wonga started in 2009.

Speaking to BBC Radio 4’s Today programme, Justin Welby said he was “irritated” and “embarrassed” at the revelation, which was brought to light by an investigation by the Financial Times.

The church’s investments are split between three national investing bodies: the Church Commissioners for England, the Church of England Pensions Board and the CBF Church of England Funds, which are managed by CCLA.

All three are covered by policies put forward by the church’s Ethical Investment Advisory Board (EIAG), and its secretary Edward Mason spoke to Blue & Green Tomorrow.

What does the fact the Church of England can invest indirectly in Wonga say about the way it screens its investments?

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We have a very clear policy on payday lending and other forms of high interest rate lending, in that we don’t invest in it.

This exposure to Wonga came about through an investment in a pooled vehicle. That means it’s not a vehicle that only we invest in, but a number of different investors will invest in it. It’s an area of investment where you can’t have the same control over what goes into the fund.

We have a different policy approach there, which requires the investing bodies to make an assessment of the likely materiality of exposure to restricted areas of investment, and to monitor that in the course of the fund’s life, which is obviously what we’ve done in this case.

The investment in Wonga is very small: £75,000 which represents 0.3% of that fund. Judging that against the pooled fund’s policy, that’s not a material exposure, so although it’s not something we like – we don’t support payday or high interest rate lending – it is an investment that can be managed.

The Church of England allows investment in companies that derive up to a quarter of turnover from tobacco, gambling, alcohol and high interest rate lending, and 3% for pornography and 10% for weaponry. Wouldn’t 0% be a more sensible level of investment?

The thresholds are set individually across each policy. We look at the way in which business operates, so on an area like payday lending, for the specialised companies that’s what they do; they do payday lending. They may have one or two other activities but a 25% threshold will capture any company that is a payday lender.

A 25% threshold does the job so that’s our standard test as to whether a business is substantively involved in something that’s a major part of their activities.

You will have seen we have zero tolerance for indiscriminate weaponry – that’s cluster munitions, landmines, nuclear weapons and nuclear fissile material. That’s because it’s so contrary to our values as a church. It is possible to assess companies against that threshold, and we do it there because we think it’s in line with our values and because we are able to capture companies with any exposure in those areas.

On something like pornography, because again, we don’t want exposure to producers of pornography or people who are supplying it, we have a 3% threshold. We’ve taken advice from our screening service adviser – we use specific research providers in these areas – and they advised us that 3% was the minimum that they could screen against.

The church had a similar challenge over its investment in News Corporation, regarding the alleged hacking of phones. What is the church doing to pre-empt and prevent future embarrassments?

We have our policies; we apply them where we can. Where we have to get exposure to areas through pooled vehicles, then we have this test of materiality. So there hasn’t been a breach of policy of our ethical investment framework in this instance.

The Church Commissioners is quite a sizable institutional investor – its portfolio is £5.5 billion – and it needs to access a wide range of different investments to generate the returns, to provide the income for the church year-on-year, to fund its activities and to pay the pension liabilities that it is responsible for.

There’s a whole legal framework on that and it has to manage very carefully the number of exclusions that it operates. The archbishop of Canterbury said today that it is a complicated area, the investments are complicated and business involvements are complicated. We absolutely do our best to be ethical within the constraints of the investment vehicles that are available and the legal framework.

The EIAG, as its name suggests, is an advisory group. Therefore, could the national investing bodies choose to reject its ethical investment recommendations?

They have legal right to invest in anything they wish. They are responsible for their investments and responsible for ensuring the way they invest are appropriate for the values of their beneficiaries.

But all the policies that we publish have been adopted by them. I present the policies to the trustee bodies, and we have a process of dialogue as policies are being developed. It’s inconceivable that [they would not accept the policies].

Ethical investment among private investors seems to be gradually moving towards more positive strategies – those that maximise social impact and actively benefit the environment, for example. Has the church considered these alternative strategies?

An individual investor can do whatever they want with their money. If they want to put it all into microfinance or all into renewable power infrastructure, they have the freedom to that. They can invest exactly as they want.

An institutional investor like the Church of England investing bodies can’t do that. It’s not their money; it’s someone else’s money. That’s what fiduciary responsibility means: you’re looking after money for someone else.

That means the pensioners who are receiving the pensions, the parishes that receive money to fund their ongoing activities so there is a Church of England presence in every parish of the country. So there’s a legal framework for that, and there’s a limited extent to which you can take ethical considerations into account in managing that money. We do that to the maximum extent possible.

In the UK stock market, the Church Commissioners excludes 12% because of our ethical restrictions. That’s a lot of the stock market to exclude, but we do it because it’s the right thing to do and we think that’s what our beneficiaries want. But there are constraints.

In terms of positive investment, they have to meet the returns criteria, because again that’s what the obligations of the investing bodies are – to generate the returns the beneficiaries need – and there are some very interesting investments. The Church Commissioners invests a substantial £200m in Generation Investment Management, for example. That’s invested with full integration of sustainability considerations and that is a very positive form of ethical investment, and something that we’re doing and exploring.

There are different ways in which ethical investment is applied is applied across the portfolio. We have the exclusion as our bottom line; there’s this sustainable investment mandate, but there are constraints.

Further reading:

Archbishop ‘embarrassed’ at Church of England investment in Wonga backer

‘We will compete you out of existence’, Archbishop tells payday lenders

‘The church must see caring for the environment as part of morality’

Church of England urged to use theology as motivation for fossil fuel divestment

The Guide to Sustainable Investment 2013

Economy

A Good Look At How Homes Will Become More Energy Efficient Soon

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energy efficient homes

Everyone always talks about ways they can save energy at home, but the tactics are old school. They’re only tweaking the way they do things at the moment. Sealing holes in your home isn’t exactly the next scientific breakthrough we’ve been waiting for.

There is some good news because technology is progressing quickly. Some tactics might not be brand new, but they’re becoming more popular. Here are a few things you should expect to see in homes all around the country within a few years.

1. The Rise Of Smart Windows

When you look at a window right now it’s just a pane of glass. In the future they’ll be controlled by microprocessors and sensors. They’ll change depending on the specific weather conditions directly outside.

If the sun disappears the shade will automatically adjust to let in more light. The exact opposite will happen when it’s sunny. These energy efficient windows will save everyone a huge amount of money.

2. A Better Way To Cool Roofs

If you wanted to cool a roof down today you would coat it with a material full of specialized pigments. This would allow roofs to deflect the sun and they’d absorb less heat in the process too.

Soon we’ll see the same thing being done, but it will be four times more effective. Roofs will never get too hot again. Anyone with a large roof is going to see a sharp decrease in their energy bills.

3. Low-E Windows Taking Over

It’s a mystery why these aren’t already extremely popular, but things are starting to change. Read low-E window replacement reviews and you’ll see everyone loves them because they’re extremely effective.

They’ll keep heat outside in summer or inside in winter. People don’t even have to buy new windows to enjoy the technology. All they’ll need is a low-E film to place over their current ones.

4. Magnets Will Cool Fridges

Refrigerators haven’t changed much in a very long time. They’re still using a vapor compression process that wastes energy while harming the environment. It won’t be long until they’ll be cooled using magnets instead.

The magnetocaloric effect is going to revolutionize cold food storage. The fluid these fridges are going to use will be water-based, which means the environment can rest easy and energy bills will drop.

5. Improving Our Current LEDs

Everyone who spent a lot of money on energy must have been very happy when LEDs became mainstream. Incandescent light bulbs belong in museums today because the new tech cut costs by up to 85 percent.

That doesn’t mean someone isn’t always trying to improve on an already great invention. The amount of lumens LEDs produce per watt isn’t great, but we’ve already found a way to increase it by 25 percent.

Maybe Homes Will Look Different Too

Do you think we’ll come up with new styles of homes that will take off? Surely it’s not out of the question. Everything inside homes seems to be changing for the better with each passing year. It’s going to continue doing so thanks to amazing inventors.

ShutterStock – Stock photo ID: 613912244

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Economy

IEMA Urge Government’s Industrial Strategy Skills Overhaul To Adopt A “Long View Approach”

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IEMA, in response to the launch of the Government’s Industrial Strategy Green Paper, have welcomed the focus on technical skills and education to boost “competence and capability” of tomorrow’s workforce.

Policy experts at the world’s leading professional association of Environment and Sustainability professionals has today welcomed Prime Minister Teresa May’s confirmation that an overhaul of technical education and skills will form a central part of the Plan for Britain – but warns the strategy must be one for the long term.

Martin Baxter, Chief Policy Advisor at IEMA said this morning that the approach and predicted investment in building a stronger technical skills portfolio to boost the UK’s productivity and economic resilience is positive, and presents an opportunity to drive the UK’s skills profile and commitment to sustainability outside of the EU.

Commenting on the launch of the Government’s Industrial Strategy Green Paper, Baxter said today:

“Government must use the Industrial Strategy as an opportunity to accelerate the UK’s transition to a low-carbon, resource efficient economy – one that is flexible and agile and which gives a progressive outlook for the UK’s future outside the EU.

We welcome the focus on skills and education, as it is vital that tomorrow’s workforce has the competence and capability to innovate and compete globally in high-value manufacturing and leading technology.

There is a real opportunity with the Industrial Strategy, and forthcoming 25 year Environment Plan and Carbon Emissions Reduction Plan, to set long-term economic and environmental outcomes which set the conditions to unlock investment, enhance natural capital and provide employment and export opportunities for UK business.

We will ensure that the Environment and Sustainability profession makes a positive contribution in responding to the Green Paper.”

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