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Oliver Balch talks to Edward Mason, head of responsible Investment at the influential Church Commissioners for England, about why it is critical to engage with the likes of Exxon Mobil and BP
As corporate missions go, the Christian church can surely lay claim to have one of the longest standing. Since the moment Moses stepped down off Mount Sinai, the institution’s core tenets have – quite literally – been set in stone. Don’t steal, don’t lie, don’t covet, and so forth.
In a way, this puts Edward Mason on the front foot. As head of responsible investment for the Church Commissioners for England, the body that manages the Anglican Church’s historic property assets, he has a clear ethical mandate from on high.
Yet, how this translates into practice for someone charged with ensuring that the Church Commissioners’ investment fund of £8.3bn is ethically managed is a different matter.
We are stewards of creation. And clearly climate change is damaging creation
Mason, who is nearly five years into his current job, is unabashed about how theological injunctions, such as promoting the intrinsic dignity and equality of every human being and the Christian concept of loving one’s neighbour, have played a central role in his employers’ investment policy.
From the get-go, the institution instructed those managing its investments to ensure that tobacco, pornography, armaments and other so-called “sin stocks” be excluded from its portfolios.
While this position remains as strong as ever, Mason has championed a more progressive, more positive approach to how the Church of England’s investment muscle might be flexed.
One important development under his tenure is the precedence now given to climate change, which he describes as “the biggest ethical issue that the Church of England faces as an investor”. Immediately on taking up his post, he helped spearhead a new climate change policy for the Church Commissioners, which was launched in 2015.
Climate change “really matters to Christians” for two reasons, Mason states: “One is that we are stewards of creation. And clearly climate change is damaging creation – it's damaging our ecosystems, our biodiversity, all kinds of critical aspects of the natural world.”
The issue also taps into the Anglican church’s historic concern for the poor and marginalised. Not only are the world’s most vulnerable likely to suffer the effects of climate change; they are also the least able to adapt to them, he points out.
My diplomatic background comes in useful on climate change because it's obviously an issue with a strong political dimension to it
Arguably, however, it is not what Mason has chosen to get his teeth into while at the Church Commissioners that is most interesting, but how he has chosen to act.
By nature, 51-year-old Mason is a measured, cerebral type; given more to quiet persuasion than charging the barricades. These qualities served him well in the early part of his career, when he worked as a foreign diplomat for the British government. His 15 years at Her Majesty’s service saw him posted to Zagreb and Oslo, as well as covering Ireland and various African countries as a desk officer in London.
“I think my previous diplomatic background comes in particularly useful on climate change because it's obviously an issue with a strong political dimension to it . . . Also, with companies, it requires a tactical approach. It’s all about working out where they’re coming from, where agreement might be found, what leverage we have as investors.”
Mason has had the opportunity to put his skillset to the test in his negotiations with ExxonMobil. Together with his counterpart at New York State Common Retirement Fund, Mason heads up investor engagement with the US oil and gas major.
The experience has had its ups and downs, he readily admits. In 2016, a shareholder resolution calling on the company to conduct an analysis of the business impact of a 2C temperature rise scenario was rejected. Undeterred, investors came back the following year and pushed the resolution through.
Today, ExxonMobil not only issues an annual energy report (including a 2C scenario assessment), but now publicly backs the Paris Agreement and lobbies for a carbon tax in the US. It has also altered its board composition to include a climate scientist.
My experience with Exxon has been an opportunity to model how investors can progressively influence corporate strategy
However, Mason and his fellow supporters in the climate-conscious investment community have had less joy persuading ExxonMobil to set emissions targets that are consistent with the Paris Agreement. After lobbying the Securities and Exchange Commission (FSC), it even managed to get the resolution scrapped from the ballot at its most recent shareholder meeting.
Despite a petition signed by investors with over $9.5trn assets under management, the regulator did not budge. Mason is not discouraged. He knows negotiating can sometimes be a long game. Plus, he feels that the resolution – in spite of being scrapped – sent a “pretty strong demonstration” about investor concerns over Exxon’s climate liabilities.
Climate change requires a strategic change on the part of companies, he says, which argues against “a quick sort of in-and-out engagement”. He adds: “In general, I’d say that my experience with Exxon has been an opportunity to model how investors can progressively influence corporate strategy in a situation where a company can – at times – be determinedly resistant.”
This commitment to using investor clout to nudge, cajole and – hopefully, eventually – convince public-listed corporations to change tack on big ethical issues such as climate change is central to Mason’s theory of change.
A stellar example of this theory in practice is Climate Action 100+, which the Church Commissioners actively supports. The investor-led initiative pushes the world’s most significant corporate greenhouse gas emitters to curb emissions to strengthen their climate-related financial disclosures.
In the two years since it was launched, Climate Action 100+ has won the backing of more than 320 investors with more than $33trn in assets collectively under management. And they have won some notable victories. One came last month, when a resolution compelling BP to set out a business strategy consistent with the goals of the Paris Agreement won overriding support.
We madeit clear we would divest from other companies that weren't taking their climate responsibility seriously
Another initiative backed strongly by Mason is the Transition Pathway Initiative (TPI). Launched in early 2017, the initiative sees the Church Commissioners join forces with its sister investment body, the Church of England Pensions Board, and the Environment Agency Pension Fund.
Among other achievements, the TPI has developed a robust tool that investors can use to research companies’ carbon impacts and liabilities, as well as inform their corporate engagement activities. It has since been taken up by Climate Action 100+ as its primary benchmarking methodology.
Of course, as any diplomat will tell you, a successful engagement strategy requires both parties to be broadly committed to the same end. And, as he or she will also tell you, that’s not always the case.
Off the bat, some negotiations just aren’t worth entering into. So when the Church Commissioners launched their revised climate change policy, for instance, it included a commitment to divest from any companies that derived more than 10% percent of revenues from thermal coal mining or oil production.
“We also made clear that we would divest from other companies with material impacts on climate change that weren't taking their climate responsibility seriously.”
It’s not just climate change where Mason and the investment managers with whom he works are willing to put their foot down. In 2010, barely a year into his initial job at the Church Commissioners, the Church of England took the controversial decision to divest from Indian mining firm Vedanta on the grounds that its proposed mine in Orissa trampled on tribal peoples’ rights.
Firms responding to our concerns and adjusting their policies and practices accordingly: that’s what success looks like for us
The decision, taken on the advice of the Ethical Investment Advisory Group, of which Mason was secretary, triggered other investors to follow suit. Such was the dent on Vedanta’s reputation that it eventually had to de-list from the London Stock Exchange. (See also: ‘UK multinationals will face greater scrutiny after the Vedanta decision’)
Mason’s attitude towards divestment is anything but gung-ho: “We prefer to influence companies successfully. Firms responding to our concerns and adjusting their policies and practices accordingly: that’s what success looks like for us.”
But the ability of the Church of England to put its ethics before financial interest and say “enough is enough” is equally important, says Mason. Few other investors have such free rein, he adds, which increases the moral obligation to respond when ethical lines are crossed.
“If a company is not acting responsibly, even after engagement, and we can't make the progress that we're looking for, then it's necessary for us to step away. It's important for our own integrity and our credibility with our stakeholders to have clear red lines.”
The Church Commissioner’s firm stance in the Vedanta affair flags up not only its willingness to take a stand, but ability to swing the heads of headline writers. The latter is something that the current Archbishop of Canterbury, Justin Welby, has used to great effect, kicking off national debates on everything from pay-day lending to corporate tax avoidance.
There are some real fragilities in our system at the moment ... As church investors, it’s important we point these out
Nor is it just the ears of news editors that prick up. Colleagues in the wider investment and banking communities also take note, Mason states. He comes back to the example of Vedanta. When the mining giant sought to acquire Cairn Energy shortly after the divestment furore, its lenders required it to accept the recommendations of an independent sustainability review without debate.
“Other investors may not necessarily be able to take the same action as us and divest, but there are other things that they can do – they can carry on engagement, for instance, or put conditions on corporate lending.”
Looking forward, Mason says climate change will remain “the biggest issue on our plate for some years to come”. But as urgent as the climate crisis is, Mason says it is important that the Church Commissioner also keeps its eye on other issues, including corporate tax avoidance, excessive executive remuneration, and the living wage for workers.
“It's important that investors help steward their investment so that capitalism is successful and productive for all . . . yet there are some real fragilities in our system at the moment, with widespread inequalities and people feeling left out. As church investors, it’s important we point these out.”
As the Gospels tell it, Jesus was so disgusted at the usurious practices of the money-changers in Jerusalem that he overturned their tables and forcibly ejected them from the temple. That’s not Mason’s style. All the same, don’t let the thoughtful manner of this former diplomat fool you. Cross his employer’s ethical lines and you can expect a swift response.
CV: Edward Mason
Head of Responsible Investment, Church Commissioners for England
Secretary to Ethical Investment Advisory Group, Church Commissioners for England
2009 – 2014
Head of London office, Independent Diplomat
2005 – 2009
British Foreign and Commonwealth Office
1990 – 2005