Mike Sturgess, Chair of the Diocesan Board of Finance for the Diocese of Truro, shares the steps that the diocese has taken on its journey towards reaching net zero by 2030 and investing in climate solutions, including solar power, wind power and battery storage.

In February 2020 the Church of England’s approved its ambitious target to achieve net zero carbon emissions by 2030. In response, the Diocese of Truro started to develop a new environmental strategy, built around the vision: Cherish Creation, Cut Carbon, Speak Out. This started with every main diocesan committee setting out its own objectives in relation to these three aspects of the strategy.

These were then reviewed by a new Diocesan Environment Board, which consisted of representatives reflecting each aspect of the diocese. The board challenged and refined these objectives, and then brought them together to create the overall diocesan strategy.

The Diocese’s Investment Management Committee was part of this process. Our funds were already invested in a way that met the Ethical Investment Policy of the Church of England’s Ethical Investment Advisory Group. However, as part of our response to the Net Zero 2030 ambition, the Investment Committee took the view that we should be going further. We decided that we did not wish to continue investing in fossil fuel extraction.

We therefore started talking to our two fund managers, who between them managed our investment portfolio, about funds which excluded fossil fuel extraction. Our main fund manager had already done this, and our second fund manager had been talking about a new fund that would meet this need, so all looked well.

As COVID started to affect the marketplace, we reviewed our portfolio in early 2020 and decided to rebalance our portfolio slightly. We therefore sold £1m of investments held by the smaller fund manager and reinvested the money across three infrastructure companies / funds. This was the first time in recent years that we had directly invested in companies, rather than through a fund manager.

There were two strands to this decision. Firstly, we viewed these infrastructure funds / companies as an equivalent to bonds, providing a reliable income stream in times of uncertainty. Secondly, we wanted to go further than simply disinvesting from fossil fuel extraction. We wanted to be part of the solution by investing in renewable energy. So, one of the three new companies invested solely in renewables, with onshore and offshore wind, Solar PV and battery storage. The other two infrastructure companies also include some renewable projects, including the supporting infrastructure.

By the end of 2020 our smaller fund manager told us that they were no longer planning to launch a fund that was free from fossil fuel extraction. We therefore decided to sell our entire holding in this fund. We also sold some of our other investments to create a new £10m fund. This was split between two new fund managers, investing in funds with high ESG credentials.

As well as investments on the financial markets, the diocese holds quite a bit of land, known as glebe land. Historically, this was given to individual priests to provide them with a source of income. The amount of such land varied from one parish to another, creating wealthy ‘livings’, and poor ones. In 1978 all such land was transferred to the dioceses and held as an endowment fund to pay the parish priests centrally. The land is therefore scattered across the diocese, often in small parcels – a field here, another one there. As the towns and villages have expanded, so some of this land has been sold, whether for open-market developments or purely for affordable housing. The gains from these sales then come to the investment committee to invest.

In the first quarter of 2021, having sold some glebe land, we expanded the direct investment in infrastructure companies, investing an additional £0.75m in three new companies, all focused on renewables. These companies increase our investments in solar and wind, but also add hydroelectricity and biogas projects. Clearly, the funds managed by our other fund managers also include some renewables in their portfolios as well.

Of course, the obvious question is, ‘How this has impacted on the performance of our portfolio?’ That is easier to ask than answer, given the state of the markets in 2021 and the first half of 2022. Our investment income is substantially the same as before. Indeed, the infrastructure investments provide higher income yields than our other investments, and they alone have held or increased their value this year whilst our traditional investments have fallen in value significantly. That, of course, is the nature of these investments, given that their future income streams are highly predictable. In a bull market, when investment values can increase significantly, they will likely underperform, but they are proving to be a useful part of a balanced portfolio.

Looking to the future, we will seek to work with our fund managers to get more detailed information about our portfolio. It would be good to get a more accurate analysis of how our funds are invested, perhaps split between ‘neutral investments’ and those that actively help to tackle climate change. As climate change reporting improves, we want to calculate (or estimate) the overall carbon footprint of our portfolio. We are also exploring ways that we might work with others to use some of our glebe land to improve biodiversity, help with carbon sequestration and maybe even be used for solar or battery storage.

We are still at the start of our journey to help tackle climate change, but as a diocese we will continue to seek new ways to cherish creation, cut carbon and speak out.