Trustees no longer accept choice between ethical investment and financial returns

10 Sep 2020 News

Charity trustees no longer accept that ethical investment acts as a drag on financial returns, according to the Christian fund management firm Epworth.

Speaking yesterday during Civil Society Media’s Faith Week conference, Mark O’Connor, head of business development at Epworth, said that trustees “just will not wear” the idea that socially-responsible investment strategies must come with below-market gains.

At the same event, David Palmer, also from Epworth, said that many Christians increasingly see fossil fuels as a “sin stock” in common with those associated with betting and pornography.

‘People should not fear ethics’

In response to a question about Epworth’s new Climate Stewardship Fund for charity investment, O’Connor said: “There’s a new challenge. Ethical investment is no longer [the case] that you can invest and it is OK if you are a few percentage points behind the market.

“Most charity trustees just will not wear that. So this solution and other solutions have to deliver on both the ethics and the investment. That is the investment manager’s job.”  

He added: “People should not fear ethics. They can have ethics and returns. That may not be the top return at any particular time but that’s the profile. You can have both. You can have your cake and eat it.”

O’Connor also said that “a lot of UK charities have contributed” to the new fund already, which Epworth’s own analysis shows is associated with a carbon intensity 64% lower when compared with the FTSE all-stock index.

Carbon intensity is a measure of harmful emissions required for the production of units of energy.  

Shifting attitudes to ‘sin stocks’

In a discussion about the options for charities considering divesting from investments in fossil fuel companies, David Palmer, the chief executive of Epworth, said that many Christian investors had shifted in their views during recent years.

Those investors are no longer comfortable “profiting from companies whose main product does harm to our world”, Palmer said.

He added: “For many faith investors, this is a real issue. Not whether the companies are aligned with Paris [the treaty which set international goals on climate change] or not, but rather, whether it is sinful to be profiting from their activities in the same way as other ‘sin stocks’ such as gambling or pornography or weapons providers?

“In the UK, the Christian faith is on this journey, from the pragmatic view of fossil fuels – that they are a necessary evil – to one where many Christians see them as a ‘sin stock’.”

Investors’ integrity

Canon Jennifer Smith of Wesley's Chapel in Islington told the event that decisions weighing rates of return against ethical stocks involved careful thought about the intentions of small-scale investors.  

Smith said: “This money doesn’t belong to us.

“This money is made up of five pounds and one pounds and small contributions given by people over years and all over the country.

“My calculation about this question, and when to jump and how much return is allowable to sacrifice, is down to imagining the integrity of the people who have given the money over time, and imagining their goals.”

Faith Charities Week – 7-11 September 2020
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