The Church of England has pledged to divest investments in thermal coal and tar sands due to concerns over the ethics of investing in fossil fuels. But the Church is also the largest private owner of UK forestry, which enjoys generous tax breaks and is often used for the production of biomass energy, itself ethically controversial.
Following a meeting of the Church Commissioners and the Church of England Pensions Board last week, the Church announced plans to sell off £12 million worth of investments in thermal coal and tar sands. The announcement coincided with the adoption of a new climate change policy supporting the transition to a low carbon economy, as recommended by the Church’s Ethical Investment Advisory Group (EAIG).
Commenting on the decision, The Rev Canon Professor Richard Burridge, Deputy Chair of the EIAG said: “Climate change is already a reality. From an ethical perspective the focus of the investing bodies must be on assisting the transition to a low carbon economy.
“The Church has a moral responsibility to speak and act on both environmental stewardship and justice for the world’s poor who are most vulnerable to climate change. This responsibility encompasses not only the Church’s own work to reduce our own carbon footprint, but also how the Church’s money is invested and how we engage with companies on this vital issue.”
The Church’s commissioners and senior members made it clear that it is imperative to act ethically when making investments. Edward Mason, Head of Responsible Investment for the Church Commissioners, said: “This is one of the most comprehensive policy frameworks on climate change adopted by any institutional investor. This is not about divestment v engagement. This policy talks to how institutional investors committed to ethical and responsible investment can integrate climate change considerations into their thinking and investment strategy. This is an evolving space. We want to continue to collaborate with others to play our part in the transition towards a low carbon economy and low carbon investing.”
Yet investing ethically is not as clear-cut as the Church appears to believe. Currently, 4 percent of the Church’s investment portfolio is held in sustainable forestry. According to the Times, the Church has broadened that investment by purchasing 6,900 hectares of commercial forestry.
But forestry holdings are well known vehicles for tax avoidance – the legal use of tax laws to reduce ones’ tax burden. Both income and profits from timber sales are free from income and corporation tax, and any increase in the value of timber is free from capital gains tax. Forestry also qualifies for 100 per cent business property relief under inheritance tax rules once it has been owned for two years.
The Church itself believes that tax avoidance is sinful, and so presumably unethical. In 2011, Archbishop John Sentamu, the second highest authority in the Church said that tax avoidance is “definitely a moral issue”.
When asked whether it was sinful, he replied: “It is sinful, simply because Jesus was very clear; pay to Caesar what belongs to Caesar and to God what belongs to God.”
Those avoiding paying their full tax liabilities were “not only robbing the poor of what they could be getting, they are actually robbing God, because God says ‘bring into my store house all the tithes’,” he said, adding “So if God has told us to be just, to walk humbly and to be merciful and then we behave in a very strange way – God is being robbed, the world is being robbed, your neighbour is being robbed.”
Forestry investment poses a further ethical question, thanks to its use in biofuel production. The World Bank warned seven years ago that biofuels were responsible for pushing up world fuel prices by as much as 75 percent in a six year period, pushing as many as 100 million people below the poverty line. By contrast, higher energy and fertilizer prices added just 15 percent to the cost of food during the same period.
“Political leaders seem intent on suppressing and ignoring the strong evidence that biofuels are a major factor in recent food price rises,” said Robert Bailey, policy adviser at Oxfam. “It is imperative that we have the full picture. While politicians concentrate on keeping industry lobbies happy, people in poor countries cannot afford enough to eat.”