The Covid-19 pandemic is having a wide ranging impact on society and has shone a spotlight on the inequality that exists across issues such as race, deprivation, and mental health. Addressing inequality is at the core of the UK charity sector – indeed for many it is their mission to tackle it.
Another feature of the pandemic has been the support received by business from governments. Companies now need to respond to this extraordinary support, ensuring that they are taking inequality and the wider needs of society into account. This response is expected across a wide range of issues – including the climate emergency, diversity, workers’ rights and executive remuneration.
One issue that will become of increasing importance to society, and by implication to charities as they consider their investments, is Tax Justice. It is not a new issue; in recent years, the media spotlight has often been on companies whose tax affairs may be considered questionable. But what do we mean by Tax Justice? At its essence, the concept is simple – it is to ensure that companies pay the appropriate level of taxation and are doing so in the correct jurisdiction. That they pay their fair share for the costs of the education that their workforce received, contribute to the transport system that delivers goods to and from their factories or depots and pay for the safe working environment provided for them by the police, fire and medical services that can be taken for granted.
The Fair Tax Mark is an independent certification scheme that was launched in February 2014. It seeks to encourage and recognise organisations that pay the “right amount of corporation tax at the right time and in the right place”. National brands and some FTSE listed companies, including SSE and Marshalls, have obtained the certification.
We advocate for responsible tax behaviour and engage with the management of portfolio companies on this important matter. Having raised the Fair Tax Mark with MJ Gleeson, the UK house builder; we were delighted when they became the first such business in their sector to be accredited.
The issue of Tax Justice received substantial press coverage recently when one of the world’s largest investors, Norges Bank Investment Management (NBIM), made tax matters a reason for disinvestment. NBIM announced their intention to divest from seven companies as a direct result of aggressive tax planning and a lack of transparent policies within these companies. Whilst the names of those companies remain anonymous, the news sends a strong signal to companies that investors are focusing on Tax Justice and they must get their tax affairs in order. Both Epworth and ABP (the large Dutch pension investor) came out in support of NBIM’s recent decision. We consider aggressive tax planning to be equivalent to tax evasion, which runs contrary to the most basic standards of ESG and ethical business conduct.
As the economy starts to recover, companies with opaque tax affairs will generate concern regarding their underlying governance and ethics. Addressing Tax Justice will be one of many indicators as to how seriously a company is taking its responsibility to society. Companies should be reporting to investors where they make their revenue, employ their workers – and pay their tax.
How can charities play their part? There are two easy wins here. Firstly, raise Tax Justice with your investment manager and ask them to ensure it is on the list of ESG issues that they consider when they invest. Secondly, each time you meet with your investment manager, have Tax Justice as an agenda item – asking what companies they have engaged with and what progress has been achieved.
If we do not tackle this now, then when? Campaigning for Tax Justice across all the companies a charity invests in can play a substantial role in delivering the economic wealth that will allow many of the inequalities in our society to be better addressed.
David Palmer is chief executive at Epworth Investment Management and the Central Finance Board of the Methodist Church. During 2020, Epworth became the first fund manager in the UK to secure the Fair Tax Mark.
Risk warning and notes
Epworth Investment Management Limited (“Epworth”) is authorised and regulated by the Financial Conduct Authority (FCA Registered Number 175451). It is incorporated in England and Wales (Registered Number 3052894), with a registered office at 9 Bonhill Street, London EC2A 4PE and is wholly owned by the Central Finance Board of the Methodist Church.
David Palmer, chief executive of Epworth Investment Management, discusses issues relating to 'sin stocks'.
David Palmer from Epworth Investment Management reflects on the highlights from the Faith Charities Forum.
David Palmer, chief executive of Epworth Investment Management, says that as charities are increasingly coming into focus for how they conduct their affairs, this will extend to questions about their investment choices.