Church digs deep to measure real impact of decisions

Real-world impact – Church of England investments

Many faith groups are setting themselves the goal of making sure their investments improve the world and don’t cause harm. But how can they be sure that their investment decisions have a positive effect?


That’s the question the Church Commissioners for England (CCfE), charged with supervising the £8.7 billion investment portfolio of the Church of England, have set themselves for 2021. How can they measure the impact of their choices?


It turns out to be a simple question without a quick or simple answer. There is a distinct lack of data on the outcomes of investment strategies. But the CCfE believe they have to start somewhere, by creating an impact investing framework. Its aim is formalise an approach that could systematically improve the real-world outcomes across the portfolio. As a first step, the CCfE is consulting with beneficiaries, investment managers, peer investors, and industry bodies.




Murky water: Hard data on the real outcomes of investment decisions can be difficult to find Picture: CCfE


Aaron Pinnock, impact investment analyst at CCfE, explains: 'Determining how much of a social or environmental outcome results from any one investment is tricky, and the full benefits – or negatives - may not manifest fully for several years. This means it’s exceptionally hard to get a handle on the sum impact of a portfolio with hundreds of companies.


'Our solution, at least for the time being, is to find something measurable that can serve as a proxy for the outcome of an investment. We do this by following a theory of change pathway to look at outputs - such as the number of hospitals built, or carbon emissions released - as a useful proxy for outcomes.


'This enables us to use real hard data to weigh up the positive and negative outputs of a company’s operations, products or services and net these off to give an overall picture of its real-world impact.'


The CCfE takes the UN’s Sustainable Development Goals as a starting point for its goals. These overlap with the Church’s ethical principles which it applies to its investments, and make it easier to compare the Church’s actions with those of other institutions.


'Impact encompasses everything really, it’s a bit greedy but it does!' – Aaron Pinnock

Another commonly used set of criteria is ESG – environmental, social, and corporate governance data. But this data is limited, according to Aaron Pinnock:


“There is no shortage of ESG data providers! But when it comes to translating outputs to outcomes, data is scarce. Perhaps this will evolve as demand grows.

“That said, data on social outputs - such as the number of educational books a company has produced, or environmental outputs, such as the volume of waste-water a business has treated, is available, often directly from the company. Interestingly, we find companies that have an impact focus often disclose data on social outputs more readily than environmental ones.”


There is a simple argument that investors should be a force for good, Aaron says, but there is a pure economic argument too. Covid-19 has shown investors that they need to be resilient to shocks, and climate change is another threat which is widely known but whose impact is uncertain.

'Having a portfolio that is resilient to these external risks is increasingly vital, and an impact lens will help to build this resilience,' said Aaron.



Aaron Pinnock: 'An impact lens helps to tie all responsible investment issues together, giving investors an enhanced understanding of how their portfolio effects the real world.Impact is a future-proof investment thesis – these issues will not go away quickly.' Picture: Aaron Pinnock


'Impact encompasses everything really, it’s a bit greedy but it does! An impact lens helps to tie all responsible investment issues together, giving investors an enhanced understanding of how their portfolio effects the real world.


'Impact is a future-proof investment thesis – these issues will not go away quickly.'


The CCfE is just beginning to learn to measure the outcomes of its investment decisions. But there are clear targets for attention, Aaron says:


'Three things jump out. First, of course, climate change. At the Church Commissioners we have set a net zero target and now need to translate this commitment into our strategy. Next comes biodiversity, something that is really hard to measure, but we need to think a lot more about in relation to our portfolios. And third, how can we encourage more gender and ethnic diversity within both our managers and underlying companies? Those are our big questions for 2021.


'Just as with impact, we don’t have all the answers – no one does – but that’s no reason not to look for them.'


The CCfE concludes that impact investment and assessment should not be seen as a revolutionary approach, but a complement to existing responsible investment practices. Having commonly-accepted reporting standards would make investing for impact simpler and begin to allow for comparability and benchmarking among investors; it now wants to see investment managers align their reporting with appropriate standards such as the EU Taxonomy for sustainable finance.

The CCfE’s document on Real World Impact includes one example – a case study of investment in two solar power projects in Chile. Analysis found that the risks were relatively low, while the project would benefit 110,000 people a year, with a lifespan of 25 years. It aligns the project with UN Sustainable Development Goals, and measures its contribution to fighting climate change – namely avoiding emissions of 170,000 tonnes of CO2 a year, equal to taking 36,000 cars off the road.

• Church Commissioners for England report on Real World Impact