CNBC Comment: Ethical vigilance isn’t easy for Church

MANAGING God’s money would test the patience of Job. The archbishop of Canterbury discovered this last week when his attempt to take on payday lender Wonga exposed the Church of England to accusations of hypocrisy.

Justin Welby locked horns with Wonga because the company’s interest charges attract legitimate concerns. But what came next was the “very embarrassing” revelation that the Church is indirectly a financial backer. That was clearly a bruising experience – but it shouldn’t quell its appetite to speak up about issues it perceives as concerning. After all, the Church is the ultimate long-term investor, and the government is trying to encourage shareholder stewardship.

The trouble is that, wherever you look, there are pitfalls to ethical investment. Almost everything, from tax avoidance to environmental failings, is a potential banana skin for the Church. So if Welby wants to extend his sermonising into corporate investment, he is going to have to be more vigilant.

This is not the first time the Church has been wrong-footed by its forays into moralising over trade and investment. In the aftermath of the collapse of Lehman Brothers and the emergency rescue of HBOS, the archbishop of York described hedge fund short-sellers as “bank robbers and asset strippers”. At almost exactly the same time, the then archbishop of Canterbury, Dr Rowan Williams, condemned the “basic unreality” of the global trade in debts.

They tapped into a moral outcry over speculative short selling pushing banks to the brink of collapse. How unfortunate it was that the Church was shown to have invested in hedge funds that shorted bank stocks in lenders across the world, while it was also exposed as an active lender of stock – the way financiers conduct such shorting trades.

According to its latest accounts, the Church still lends out £37.8m in stock. It has also increased its allotment to hedge funds as part of its £5.3bn of invested capital. Among its biggest bets, the Church commissioners also ploughed money into HSBC, which was last year fined heavily for money laundering for two Mexican drug cartels. Just over £991m of its money is held in UK equities, with £1.5bn invested in overseas stocks. Miners like Rio Tinto and BHP Billiton, as well as BP and Shell are listed in the accounts.

The Church, like any asset manager, has to produce returns and, according to its latest accounts, its commissioners raked in an annual average of 5.7 per cent over the past 10 years to help fund its £1bn yearly running bill. But while healthy returns are vital, the ambition to encourage responsible capitalism should be kept in focus, even when it’s a challenge to fulfil. Even for the Church, it can be tough to tell right from Wonga.

Helia Ebrahimi is CNBC’s UK business editor. Follow her on Twitter @heliaebrahimi