Church of England to step up pressure on firms to improve diversity

The Church of England’s investment arm is to warn companies that they must do more to protect biodiversity and increase the ethnic diversity of their senior teams or risk protest votes at upcoming shareholder meetings.

The Church Commissioners, which manages the religious group’s £8.7bn fund, will start sending letters outlining their demands to some of the worst-offending companies in the fund’s investment portfolio by mid-February.

The team is drawing up its benchmarks and the shortlist of companies – both public and private – that will be targeted in its new campaign. Bess Joffe, the Church Commissioners’ new head of responsible investment, said the fund would ratchet up the pressure by casting protest votes at annual shareholder meetings within months if companies fail to comply.

“I think you’ll see some vote impact as early as 2021. But of course it’s not going to be taking companies off guard – we will be communicating our expectations in the next four to six weeks,” she told the Guardian.

Some of the fund’s holdings, according to a list released last June, include Google’s parent firm, Alphabet, Royal Dutch Shell, Samsung, Unilever, Facebook, Tesco and AstraZeneca. That is on top of property investments including London’s Hyde Park Estate and the Metrocentre in Gateshead, near Newcastle.

The body has previously voted against companies for poor climate change policies and all-male boards. Last year, it voted against members of the Prudential’s board over an “unacceptably low” number of female directors and put pressure on the energy giant Exxon over emissions disclosures.

The new focus on biodiversity and ethnicity is part of a three-year ethical investment plan being crafted by Joffe’s team. “We thought about recasting the way we think about things into two broad themes, so we have respect for the planet and respect for people. And I think that fits really well with the Church’s overall mission,” she said.

Joffe, a Canadian who joined from Lloyds Banking Group in August and previously held roles with Goldman Sachs and Hermes, said the shift to biodiversity was meant to encourage a holistic approach to the way companies take responsibility for protecting life on earth and enabling the planet to thrive.

“Ethnic diversity has not been a priority in any real way for companies,” she said. “They have to play their part in improving the lives of people who have been disenfranchised and left behind and who are going to suffer [disproportionately] as a result of Covid.”

The UK’s biggest fund manager, L&G, has already committed to voting against all-white boards who fail to diversify their leadership teams by 2022. In February 2020, the Parker Review showed that only 178 or 6.8% of 2,625 director positions across the FTSE 350 index weren’t held by white people.

Joffe and the Church Commissioners are expecting progress. “You want to be in a world where boards of directors, management teams and pipelines of talent look like the communities in which they exist,” she said.