The Church of England’s Church Commissioners have gone green, investing £150 million with former US Vice-President Al Gore’s environmentally minded investment firm, Generation Investment Management.
On Nov 18 the First Church Estates Commissioner, Andreas Whittam Smith reported that in late September the Commissioners had placed the funds with Gore’s boutique management firm which follows an “environmentally sustainable global equities mandate.” Funding for the investment came from “cash and Treasury bills”, he said, and not from the sale of UK equities as initially planned.
Normally I’d say that the CoE would have done better with Bernie Maddow, but with America’s Central State decreeing Gore’s scam valid for the next quadrenniel, perhaps the Church will see a return.
As the earth cools due to decreases in solar activity, so will the return on the investment.
Didn’t the CofE lose a lot of money in the past ten years or so with unwise investments? What makes them think this is such a good idea?
Our church commissioners lost enormous sums in the last downturn having speculated heavily in risky investments. They have with some sensible investment managed to redeem themselves to some extent. It looks as if they have regained the confidence to be adventurous again.
Oh dear.
I think there is a distinction to be made. As a church we should avoid ‘unethical’ investments – we have been criticised recently for playing the derivatives market to the disadvantage of others. This was ‘unethical’.
However our investments should be made for sound investment reasons alone – it these which provide the income for our activities in large part. Thus investing in something which is marketed as ‘ethical’ for its own sake is quite wrong and likely to lead to underperformance or even loss. It is not as though our resources are sufficient to take such risks. Avoiding unethical investments is not necessarily to invest in those self-alleged to be ‘ethical’.
The other somewhat alarming thing is the risk profile. In the currrent climate cash and treasury bills are some of the safest investments – it is these safe assets which have been exchanged for this so called ‘environmentally sustainable global equities mandate’ which will not be anything like as safe.
Oh dear oh dear oh dear.
[i]It is these safe assets which have been exchanged for this so called ‘environmentally sustainable global equities mandate’[/i] —Pageantmaster
Are you sure this money would otherwise have been in government securities?
If you’re investing endowment money for the long-term, you’d put the bulk of it into equities. That remains true despite the recent unpleasantness.
Investing in an environmentally oriented fund could help diversify a portfolio, all the more so insofar as rising oil prices would adversely affect the portfolio.
#7 and #8 Irenaeus
Traditionally trusts funds in the UK had to be invested in Treasury Stock and Blue Chip investments. This also acted as a benchmark for other prudent managers for assets belonging to or held on behalf of others, which would include the Church Commissioners. In the last few years these rules have been somewhat relaxed to include more risky equities.
There is generally an inverse relationship between risk and reward and in the UK this would on a scale go from less risky to more risky as follows: cash, treasury stock, government and local authority bonds, ‘blue chip” stocks. other equities, non-stock market investments and other ventures.
So a balanced portfolio might look like this:
1. One third in Cash and Treasury Stock – safe and relatively liquid with no or an unexiting yield;
2. One third in Blue Chip Stocks – shares in established and reputable companies with relatively small borrowing – moderate risk with good yields but unlikely to be spectacular; and
3. One third in equities and other investments, for example property where if these companies or developments are successful then returns will be high but there is a comensurate risk.
Now what appears to have happened here is that the Church Commissioners would have been expected to, and themselves expected to take funds from categories 2 or 3 equities to fund their investment in this ‘ethical fund’ which probably falls into category 3, although they might argue that it borders on category 2, therefore maintaining their risk profile. Instead they have taken funds from the Category 1 investments, cash and treasury stock. On the face of it they have liquidated their safest and most reputable investments and used it to invest in Category 3 investments, thereby moving their investments into the more risky category.
Unless they have made some counter investments, this would appear to be playing fast and loose with our investments for the sake of their desire to be seen as ‘right on’.
Fools and their money and all that…………
Meanwhile investors in the current recession market have been liquidating their investments and putting them into cash and less risky investments. At the moment cash is king.
I am interested in the American view of Gore’s fund at #1. America has been a bit of a graveyard for British companies and investors because we just do not know enough about investing in the US and in its investment vehicles.