The Church of England declares war on pay day lenders and then it’s uncovered they’re one of their investors. It’s a perfect story. And it draws back the curtain on the difficult business of ethical investment.
Further unfortunate headlines have largely been nipped in the bud by a frank and disarming interview with Justin Welby in the feared 8.10 slot on the Today Programme. He achieve that through such unorthodox techniques as:
1. Answering the questions
2. Being honest
3. Admitting fault
This isn’t a new idea for the Church of England, it’s had a similar policy toward unscrupulous lenders for twelve years, expanded in 2011 to prevent investment in the new breed of pay day lenders such as Wonga that have proliferated in the light of recent economic crises. The recommendation in its ethical investment policy on high interest lenders not to invest in companies with more than 25 per cent of their business in this area is not a cop out, and nor is it tolerating a little bit of sin.
The policy if correctly implemented – and my suspicion is that the investment through a hedge fund in which the Church’s pension fund invests is an error rather than a gap in the policy – means that companies engaged in pay day lending would not be invested in. However, were there a company that produces databases used for a wide variety of companies some of which were pay day lenders, then investment in this company would be acceptable as long as pay day lenders were not the core of their business model. Where the policy would fail to achieve its ends is if a pay day lender was part of a large business engaged in many different industries and the pay day lender comprised less that 25 per cent of its business, in this case the policy would need amending. And the policy is not rigid, it does not condone everything that isn’t automatically caught by the threshold, it allows the space for companies to be specifically excluded from investment. I expect that following this revelation closer attention will be paid and portfolios reviewed to ensure similar embarrassments are avoided. Continue reading