Church of England devises index for eco-friendly investing

NEW YORK: MANY investors would like to use their money to help tackle climate change, but figuring out how has not always been easy. Now a fund that benefits 38,000 current and retired clergy and other employees of the Church of England could offer a potential solution.

The Church of England Pensions Board, which manages £2.8 billion (S$5 billion), this week announced an index that rewards companies working to curb their carbon-dioxide emissions in line with the targets of the 2015 Paris agreement, and bars companies that are perceived as environmental laggards. The church's pension board is transferring £600 million to the new index, which it helped design with FTSE Russell, an index provider. Companies that rate well under a series of metrics developed for the pension fund receive more weight in the index, meaning more of their shares will be purchased, while those that don't score well will either receive reduced weight or be excluded.

Oil producers are not excluded from the index. Europe's largest oil company, Royal Dutch Shell, which has worked closely with the Church of England in developing ambitious targets for reducing its carbon dioxide emissions, is included, as is Repsol, the Spanish oil company, which has also announced far-reaching goals.

Exxon Mobil, Chevron and BP, which have been less ambitious according to the index's metrics, are at this point excluded. Adam Matthews, the church fund's director of ethics and engagement and a prominent activist on climate matters, has worked with companies like Shell to set targets for reducing emissions. Companies face a choice to put "in place targets and strategies aligned to Paris" or "work against the long-term interests of beneficiaries and wider society and be excluded", he said in a statement.

Exxon and other companies not included in the index could win their way back into the fold by setting appropriate targets, the church fund says. The new investment index is being introduced at a time when large investment firms are showing increasing interest in the risks and rewards of climate and other environmental issues. Enormous sums could potentially be used to influence corporate behaviour. Laurence Fink, chief executive of BlackRock, which has nearly US$7 trillion under management, recently vowed to put sustainability at the core of the firm's investment approach.