The Church Commissioners for England: Integrating human rights into responsible investment

The approach, initiative or process 

The Church Commissioners for England (“the Commissioners”) is a faith-based responsible, ethical investor, managing an historic endowment with assets valued at £11.1 billion. It is a UK-registered charity that is responsible for supporting the wider mission of the Church of England. Over the last thirty years it has delivered an average return of 9.6% per annum.

The Commissioners is a universal assets owner. This means that the value of the fund is interlinked with the global economy and macroeconomic risks. Therefore, it is dependent on social and environmental stability over the long term. This is amplified for the Commissioners as a faith-based investor that is obliged to provide returns in perpetuity.

Approach to responsible investment

As a responsible investor, the Commissioners ensures that its activities have a positive impact on society and the planet. Its goal is to use its voice as a leading responsible investor globally to challenge and encourage the approach of businesses where it invests and to ensure a supportive enabling environment. Being a responsible investor means being an active one – the Commissioners uses the power of its voice to encourage companies to make the changes the world needs – and showing outcomes in this regard to stakeholders and the wider public. The Commissioners holds a diversified portfolio across asset classes, investing for the long term and integrating environmental, social and governance (ESG) issues into everything it does. Its strong ethical foundation is part of the reason its voice is outsized relative to its assets under management.

Background

The last year has been one of conflict, with democratic institutions and human rights under threat across the world. Coupled with this is increasing volatility in global markets and pressure on businesses that operate across borders.

The turmoil facing the world makes it more important that human rights are upheld, not only by governments but also by businesses and investors.

The UN Guiding Principles on Business and Human Rights (UNGPs) state that while governments must protect human rights, businesses and investors also have a responsibility to respect them. For businesses, this involves avoiding human rights infringements and addressing any adverse impacts they cause, or to which they contribute or are linked. Companies can meet their responsibility by committing to respect human rights, implementing human rights due diligence and enabling remedy for harms. As a responsible, ethical investor, The Commissioners expect investee companies to respect human rights. Respect for human rights enables the management of risks and impacts on people during the transition to tech-enabled, net zero, nature-positive economies, and provides the starting point for companies to help address social inequalities via their impacts on workers, consumers and broader society. This work is led by the Social Lead in the Responsible Investment Team.

Integrating human rights into investment processes

The Commissioners is a leading global voice on the integration of human rights into investment processes and engagement. In January 2024, it published a report that sets out how it has approached the integration of human rights into asset, manager and system-level stewardship activities since the launch of its revised Responsible Investment Policy in 2022. Examples include how it works with its fund managers to include human rights in their investment decisions. In addition, the Commissioners implemented a voting policy that spells out its expectations of companies with regards to human rights.

The focus of the Commissioners’ leadership in 2024 was the launch of the Investor Initiative on Human Rights Data (II-HRD). Alongside Aviva Investors and Scottish Widows, it launched the II-HRD in March 2024 which now has 24 participating investors that manage over US$9 trillion. It is a collaborative initiative where institutional investors work to advance the availability, quality and use of corporate human rights data.

Within the II-HRD, three focus groups were set up. The first focused on collaborative engagements with ESG data providers concerning the methodologies, coverage and availability of human rights data, with the aim of improving the scale and depth of human rights data points for all investors. The second group focuses on the role of proxy advisers and how they understand and integrate human rights into their advice and voting policies. The third group focuses on the assessment of companies connected with violations of international human rights standards and global norms.

Outcomes

The Commissioners established data engagement groups for several ESG data providers, including MSCI, Sustainalytics, LSEG/Refinitiv, Moody’s, RepRisk, Bloomberg, ISS and S&P, with a particular focus on leading the engagement for LSEG and S&P. All targeted ESG data providers were successfully engaged. Following the analysis of S&P’s methodology, we contracted S&P to supply human rights data to inform our 2025 voting policy.

The Commissioners Social Lead also convened a working group of expert human rights voices from organisations including the UN Working Group on Business and Human Rights, the Organisation for Economic Co-operation and Development (OECD) and the UN Office of the High Commissioner for Human Rights. In 2025 this working group will inform the creation of a new set of principles for assessing norms breaches, which can subsequently be used by the II-HRD investors when engaging data providers and wider stakeholders.

Measures to ensure transparency and generate outcomes

The Commissioners has taken several steps to improve transparency in its human rights work, primarily through a pilot programme of systematically voting on human rights issues and engaging with companies and data providers. It discloses outcomes of these activities and related examples in its annual Stewardship Report.

Communicating with companies

A key aspect of the Commissioners’ transparency efforts involves direct communication with the companies in which it invests. After voting against 91 companies for failing to meet their human rights criteria, the Commissioners sent letters to the chairperson of each of these companies. The purpose of these letters was to:

• explain the reasoning behind the voting decision;
• outline expectations for the management of human rights risks moving forward;
• initiate a dialogue with the companies to raise awareness and place human rights on the management’s agenda.

 Approximately 10% of the companies that were sent letters responded in a meaningful way, leading to ongoing dialogue. The Commissioners intends to develop and communicate a set of social expectations – including how these relate to its voting policy – to the companies in which it holds shares in before each proxy-voting season.

Engaging with data providers and the wider market

The Commissioners has also worked to improve transparency at a systemic level by engaging with ESG data providers and proxy advisers, for example through its work on II-HRD. This initiative, in collaboration with other major investors, aims to address the lack of consistent and decision-useful human rights data. The engagement has focused on the following key messages.

•  Human rights fundamentals: data providers should provide information on the fundamental aspects of business and human rights, such as whether a company has a human rights policy, undertakes human rights due diligence and provides mechanisms to enable remedy.
• Transparency of scores: engagement has pushed for greater transparency regarding the individual data points that contribute to aggregate ESG scores.
• Disclosure of methodologies: the Commissioners has requested deeper insight into the methodologies used by data providers to assess companies.

By working to improve the quality and availability of corporate human rights data, the Commissioners aims to enable all investors to make more informed decisions, which could have a catalytic effect in the wider market.

Public reporting

The Commissioners’ report, Integrating Human Rights into Responsible Investment, is a primary example of its commitment to transparency. It details:

• the rationale for focusing on human rights as a systemic risk;
• the specific methodology of our 2023 human rights voting pilot, including the data used, company selection criteria and voting hierarchy;
• the outcomes and lessons learned from the pilot programme;
• our ongoing efforts to engage with corporations and data providers to improve the human rights data landscape. 

PRI disclaimer:This case study aims to contribute to the debate around topical responsible investment issues. It should not be construed as advice, nor relied upon. It is written by a guest contributor. Authors write in their individual capacity – posts do not necessarily represent a PRI view. The inclusion of examples or case studies does not constitute an endorsement by PRI Association or PRI signatories.