At the core of CCLA’s approach is the belief healthy markets require healthy communities, says head of sustainability James Corah
CCLA Investment Management, the UK’s largest manager of church and charity funds, is making its push into the wealth, intermediary and retail market, aiming to bring its expertise in responsible investing, particularly innovative on the social side, to a wider community.
Majority owned by its funds, the firm, which oversees £13bn ($16bn) in client assets, has built a reputation for generating financial returns in a manner aligned with its clients’ community-oriented values.
While today this may be known as environmental, social and governance (ESG) investing, CCLA has a multi-decade long track record of “taking the lead to catalyse the investment sector”, to push for progress within the business community and help create a better world, explains CCLA’s head of sustainability James Corah.
At the core of the firm’s ‘good investment’ approach is the conviction that sustainable investment markets require healthy communities. Rather than just engaging with the companies it invests in, the firm believes in “thinking systemically” about issues affecting society at large and “acting as agents of change”, thus generating greater impact, explains Mr Corah.
“An asset manager should understand their social purpose, what they are trying to achieve and help businesses move forward on that issue, particularly in this complicated, multifaceted ESG landscape where everyone’s meant to do everything,” he says.
Sustainable investors have grasped the importance of environmental challenges and are all “piling into the same initiatives” on the climate emergency. CCLA itself, as founding member of the Net Zero Asset Managers initiative, aims to achieve net-zero emissions portfolios by 2040, having launched a shareholder advocacy campaign in 2012, which then inspired the Climate Action 100+.
Yet, the desire to be a catalyst for change has led the firm to “focus heavily” on social issues, realising investors are ignoring systemic risks such as modern slavery, mental health and cost of living.
A sense of urgency
The Covid-19 pandemic has added urgency to CCLA’s campaign on emotional health and mental illness in the workplace. This started as an engagement programme in 2019, in the belief that companies were not taking mental health seriously “as a genuinely structural health and safety, human capital risk”.
In collaboration with mental health charity Mind and the UN-supported network of investors PRI, the asset manager has developed a set of indicators on which companies are marked on their approach to protecting their employees’ mental health and wellbeing. These include 27 criteria across: management commitment and policy; governance and management; leadership and innovation; and performance reporting and impact.
Businesses are evaluated and ranked by strength of their published information, including CEOs’ statements on importance of mental health, as “companies should be proactive in what they’re doing to help employees,” says Mr Corah, explaining the importance of cultivating a culture that removes stigma surrounding mental health.
The belief is that promoting and investing in mental health is both a moral and economic imperative. Those who do it well can improve worker productivity, reduce absence to sickness and lower staff turnover, reducing costs and boosting output.
In early 2022, CCLA launched its Corporate Mental Health Benchmark, assessing how the UK’s largest listed employers approach workplace mental health, recently repeating the exercise on the world’s 100 largest publicly listed companies.
The benchmarking exercise has helped companies understand the importance of making mental health programmes more structured across the company, says Mr Corah, pointing to progress at HSBC, currently the only global firm in the top tier.
According to a study by Deloitte, mental ill health in the workplace costs employers annually an average of $1,900 per private sector employee. But for every $1 put into scaled-up treatment for common mental disorders, there is a return of $4 in improved health and productivity, according to The World Health Organization.
CCLA is also in the industry’s vanguard for addressing modern slavery. In 2019, it spearheaded the ‘Find it, Fix it, Prevent it’ initiative, an investor collaboration supported by £7tn of assets, to engage with companies to tackle modern slavery in supply chains.
Approximately 28m people are thought to be victims of forced labour, according to the International Labour Organisation. While no large supply chain is safe from risks of modern slavery, it thrives in environments with weak governance, poor oversight and failure to align with international human rights standards, according to the firm.
Cost-of-living crisis
Correlated to mental health is its most recent initiative in the social space, around the cost-of-living crisis, with the UK Office for National Statistics recently reporting strong links between inflation and adult depression.
CCLA leads a 17-strong investor coalition with a collective £3.2tn in AuM, urging the UK’s largest employers to support their lowest-paid workers, paying the real ‘living wage’ as a minimum.
An estimated 4.8m UK workers earn a wage below the cost of living, many of which are facing bleak choices such as whether to ‘heat or eat’ during the winter months, according to the Living Wage Foundation.
“Our purpose is to be that pro-business, pro-capitalist, but conscientious voice that says: ‘We’re all in this together, but let’s look after the people who are most impacted right now,’” says Mr Corah.
While there are many pressures on companies, it is imperative that leaders have their lowest-paid workers “at the front of their minds”, for a more sustainable and inclusive society.
“Looking after your vulnerable employees, those who are struggling, is going to help lay the platform for healthy businesses into the future.”
CCLA will be updating its voting guidelines in 2023 and has pledged not to vote in support of increases in executive pay for companies falling short in protecting their lowest-paid workers from the crisis.
From companies’ responses so far, it has emerged that none has a robust enough response to the crisis. The support is the weakest in companies that have a high proportion of low-paid staff, such as food production, hospitality and retail.
Measuring incremental progress, on the social side, may be easier than asset managers portray, says Mr Corah, if the goal is to be a force for good for wider society, rather than “trying to create 500 different indicators to identify the best social company for your thematic portfolio”.
Investors tend to think that corporates are always behind in tackling social issues, but when engaging with them, “there is always someone, or a team, who is further ahead than you could ever imagine they would be,” he says. The role of an investor is to give that person the visibility they need to get the resources they need, and get the job done.
“It’s just our job as investors to signpost the issues that are important and make companies know that we really value them. Through doing that, we achieve more change than saying all companies are bad and aren’t doing what they need to do.”
In April, CCLA launched the Better World Global Equity Fund, bringing its expertise in sustainable investing to UK retail investors for the first time. The strategy mirrors the firm’s global equity strategy, offered to its 30,000 charity clients since 2007, which has outperformed its benchmark over the past five years, but struggled over ten.
The UK asset manager has other fund launches in the pipeline, including a multi-asset fund next year.
But penetrating the strongly competitive UK retail market may prove a bumpy road, with “lack of brand awareness” being the biggest challenge, says Jasper Berens, head of client relationships and distribution at CCLA. “It’s almost as if CCLA has been hidden in plain view for six decades, only serving charities, faith-based organisations and local authorities,” he adds, conceding that the firm remains “virtually unknown in the retail investment and wealth management industry.”
The firm also faces a number of other challenges. The private equity element of its mainstay multi-asset products will no longer be permitted under changing regulations, calling into question CCLA’s track record. Property assets may also have to be re-assessed.
“CCLA’s style bias to quality growth my also hinder its goal to vend global equity funds to retail investors,” warns a source close to the firm.
Yet, Mr Berens remains confident in CCLA’s ability to service demanding wealth managers, having added to client service, relationship management and business development support teams, now making-up a headcount of 39, in anticipation of the retail push. “We believe we have the capacity to meet the challenges.”
