The Church of England Pensions Board has today published an updated Defence Investment Policy, which further tightens the approach to investing in defence-related companies.
The new policy follows careful reflection on the recently updated advisory paper on defence provided by the Church of England’s Ethical Investment Advisory Group (EIAG), and a recent survey of scheme members’ views.
The policy notes the EIAG’s concern that ‘there can be no guarantee about the way in which weapons may be used in line with Just War principles and about the use and misuse of defence-related products and services. In light of this, the EIAG advises that extreme caution should be applied when considering whether or not to invest in companies that derive a material proportion of their revenue from defence.’
We note the EIAG’s advice to exercise ‘extreme caution’ in relation to defence in a world with increasing conflict as recorded by the United Nations, increasing medium and long-term investment risks related to conflict, and risks associated with opaque and porous defence export regimes, which may result in weapons appearing in ongoing conflicts and alleged genocides.
As a UK pension fund, the pension schemes necessarily hold UK government debt (gilts) which means an exposure to the financing of the UK government’s defence programme. In relation to direct defence investments, a more restrictive approach is reasonable and proportionate.
Noting the EIAG ‘strongly supports efforts…to encourage peacebuilding and to address systemic drivers of conflict…’ and clear member support for the work of the Board’s new responsible investment priority supporting peacebuilding across the Anglican Communion, the Policy strengthens restrictions on companies with revenues from defence reducing it from 10% to a 5% revenue threshold, and continues to exclude all companies with involvement in indiscriminate weaponry, including nuclear weapons.
The policy also seeks to address the growing number of ‘dual use’ companies that develop products that can also be used in defence. The Board will be reviewing data sources to assess such companies, and other areas where additional due diligence and engagement will be needed, such as links to oppressive regimes.
Further, the Policy supports peacebuilding as a strategic responsible investment priority. This includes the development of the Global Centre for Peacebuilding and Business and building links with and supporting the wider Anglican Communion in relation to peacebuilding.
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