'Not nearly enough progress': Church of England to fully divest from oil and gas firms over climate concerns

The divestments, which are set to be completed by the end of the year, apply to both the CofE's Pensions Board's investments as well as the Church Commissioners' £10.3bn endowment fund, with both independently making the announcements today.

The moves apply to Shell, BP and a host of other global oil and gas majors which the CofE investment managers argue have failed to demonstrate requisite progress and commitment to align their businesses with the goals of the Paris Agreement.

The Archbishop of Canterbury, Justin Welby, warned that the climate crisis threatened the entire planet, and that the world had a "duty to protect God's creation, and energy companies have a special responsibility to help us achieve the just transition to the low-carbon economy we need".

"We have long urged companies to take climate change seriously, and specifically to align with the goals of the Paris Climate Agreement and pursue efforts to limit the rise in temperature to 1.5°C above pre-industrial levels," he said. "In practical terms that means phasing out fossil fuels, investing in renewables, and plotting a credible path to a net zero world. Some progress has been made, but not nearly enough. The Church will follow not just the science, but our faith - both of which call us to work for climate justice."

Having already excluded 20 oil and gas majors from its portfolio in 2021, the Church Commissioners today went further, announcing that it would now also be excluding BP, Ecopetrol, Eni, Equinor, ExxonMobil, Occidental Petroleum, Pemex, Repsol, Sasol, Shell, and Total, after concluding that none are aligned with the goals of the Paris Climate Agreement, as assessed by the Transition Pathway Initiative (TPI).

Moreover, having now sought to exclude all remaining oil and gas majors firms from its portfolio, the Commissioners said it would be excluding all other firms "primarily engaged in the exploration, production and refining of oil or gas, unless they are in genuine alignment with a 1.5°C pathway, by the end of 2023".

The CofE Pensions Board, meanwhile, added that the investment restriction would cover all oil and gas companies in its portfolio that do not have short-, medium- and long-term emissions reduction targets aligned with limiting global warming to 1.5°C, as assessed by the independent Transition Pathway Initiative (TPI). It said will also apply to equity and also debt investments, it added.

The Pensions Board said it had been engaging with the oil and gas sector over the past ten years with a view to bolstering the level of ambition in company strategies to decarbonise in line with the Paris Agreement, and while some companies have come close to achieving alignment as assessed by the TPI, "none have met the threshold to remain investible".

As a result, it said it would "no longer prioritise engagement with the oil and gas sector on climate change and will instead refocus its efforts on reshaping the demand for oil and gas from key sectors such as the automotive industry".

Instead, it said it would be seeking "robust commitments" related to the use of oil and gas from demand sectors such as aviation, utilities, automotive, and steel, and will continue to engage policy makers on the need for greater ambition in public policy, including a phase-down of oil and gas which take account of the different needs of emerging and developing countries.

Church of England Pensions Board chief executive John Ball said: "There is a significant misalignment between the long term interests of our pension fund and continued investment in companies seeking short term profit maximisation at the expense of the ambition needed to achieve the goals of the Paris Agreement. Recent reversals of previous commitments, most notably by BP and Shell, has undermined confidence in the sector's ability to transition."

A spokesperson for Shell described the Church of England Pension Board's decision today as "disappointing, but not surprising given its recent change in stance", but continued to insist the oil and gas giant's climate strategy is aligned with the 1.5C goal set out in the Paris Agreement.

That comes despite the IPCC making clear that global emissions must fall by almost half by 2030 to stand a chance of limiting warming to 1.5C, and the International Energy Agency stating that no new sources of fossil fuels should be exploited after 2021. Shell, meanwhile, has no 2030 targets in place to reduce its full value chain emissions in line with the IPCC's recommendations, and is continuing to look to expand its oil and gas drilling worldwide.

"Our commitment to becoming a net zero emissions energy business by 2050 remains as strong as it ever was, and we firmly believe our strategy is aligned with the more ambitious goal of the Paris climate agreement. At the same time, we are clearly focused on capital discipline, enhanced performance and delivering shareholder value."

The move follows Shell's announcement earlier this month that it was abandoning its previous plans to cut oil and gas production in the 2020s, and that it aimed to increase pay-outs to shareholders, in a move that attracted fierce criticism from climate campaigners and investors.

Christian Aid head of global advocacy Jennifer Larbie said the CofE's decision to divest from fossil fuel companies is "a damning indictment of the harm these corporations are doing to the world".

"Over the years the support of Church investors has emboldened oil and gas companies and given them the social license and political capital to influence politicians around the world. That time has ended. For decades many fossil fuel companies have known the harm their activity is causing yet they continue to spend millions lobbying governments to block efforts to tackle the climate crisis.

"It is telling that the CofE, which has worked tirelessly to engage with the oil and gas industry and shift it onto a sustainable approach, has decided that these companies are beyond the pale."

Greenpeace also welcomed the announcement. The campaign group's oil finance advisor, Charlie Kronick, said the Church of England's pension board had "clearly lost faith in Shell and other oil giants' ability to redeem themselves" after "years of trying to change these companies from within".

"This should be a moment of moral reckoning for other investors and for our government," he said. "Left to their own devices, these companies are perfectly happy to unleash hell on earth to cash in their thirty pieces of silver. Ministers should stop rolling out the red carpet for fossil fuel firms and instead properly tax their enormous profits while also stopping licensing new oil and gas projects now."

The announcement comes after the CofE Pensions Board announced plans to vote against the re-election of National Grid's chair and chief executive over the firm's climate policies.

A version of this article originally appeared at Professional Pensions. Additional reporting from BusinessGreen.