THE Church Commissioners achieved a 4.1 per cent return on their investments in 2023, down from five per cent the previous yr, their annual report, released on Tuesday, says.
The total endowment fund was valued at £10.4 billion at the top of 2023 — up from £10.3 billion at the top of 2022 (News, 2 June 2023). The Commissioners’ ongoing goal is to match or exceed a return of 4 per cent above inflation (CHPI) each year. The average over the past ten years has been nine per cent.
In these percentage terms (which are usually not set against a benchmark), the portfolio has had a positive return for the past 15 years.
The report says: “The strong environment for equity markets helped us deliver a modest positive return. Our fixed income allocation, which is now an even bigger a part of the fund, also performed well. . . While our public market allocations helped performance, our private markets and real asset portfolios were a drag on returns in 2023. In private markets, falling valuations and currency headwinds led to weak returns, particularly enterprise capital.”
The Commissioners’ financial activity is split amongst several portfolios. Returns are set against an asset-class-level benchmark, which the Commissioners have elected to not publish. (As they are usually not a regulated, listed fund with equity investors, they are usually not under an obligation to achieve this.)
The public market portfolio didn’t keep pace with an AI-related boom in the worldwide equity index last yr, the report says, returning 11.7 per cent. (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla accounted for 40 per cent of the worldwide equity index return.) As of December, Alphabet, Amazon, Apple, and Microsoft were among the many Commissioners’ top 20 holdings.
The absolute return portfolio (returns largely independent of the external environment) represented about 11.8 per cent of the fund. In 2023, it returned 6.3 per cent, which, the report says, “provided a useful contribution at a complete portfolio level and was performance given the strength in sterling”.
The allocation of fixed income — which, for many of the past 15 years, has been “very low” — was increased with higher rates of interest, and returned 8.3 per cent.
The “drag on returns” — the private equity and venture-capital portfolios, totalling £161 million and £23 million respectively, which spend money on unlisted corporations — achieved total returns of just 1.2 per cent and a negative return (-12.7 per cent) respectively in 2023.
Real assets — property-related investments — also delivered a negative return of (-0.5 per cent) during 2023. The best returns within the portfolio were industrial and value–Linked Loans investments: 11.2 per cent and 10.6 per cent respectively.
The total return on the endowment fund is derived from each income and gains on investments. Total income for the yr was £192 million (up £43.6 million from £148.4 million in 2022). Total gains on investment assets were £345.1 million (down from £413.1 million in 2022).
Last yr was the primary of a recent funding triennium (2023-25) for the Commissioners, totalling £1.2 billion, a rise of about 30 per cent from the previous triennium. Of this, £400 million has been allocated to the Strategic Mission and Ministry Investment programme (SMMI).
SMMI is a recent stream through which the Archbishops’ Council allocates funding to dioceses (News, 18 March 2023). It replaces Strategic Development Funding (SDF), Strategic Capacity Funding, and Strategic Transformation Funding. It features a £338.5-million Diocesan Investment Programme for the present triennium, comprising £100-million of Lowest Income Communities Funding (News, 7 November 2019), and a remaining £240-million fund for which all dioceses can bid. Bids should be in keeping with the priorities of the overarching Vision and Strategy priorities for the 2020s.
The latest annual report states that the funding of bishops’ and archbishops’ ministry increased from £44.9 million in 2022 to £47 million in 2023, largely owing to the refurbishment programme at Lambeth Palace. Total money paid on clergy pensions also increased, from 117.1 million in 2022 to £120.6 million in 2023, as did charitable expenditure (excluding clergy pensions): up from £186.8 million in 2022 to £223 million in 2023.
The latter features a proportion of payments to support dioceses and parishes: this was up from £117.2 million in 2022 to £152.8 million in 2023. Cathedrals ministry was down barely in this era, from £14.3 million to 14.1 million.
Writing in a foreword to the report, the Archbishop of Canterbury said that conflicts and crises world wide, including in Gaza and Ukraine, had made the Commissioners’ stewardship of the endowment fund “ever more complicated”. And, due to food insecurity, child poverty, and housing crisis within the UK, he writes: “Ethical investment, never easy, is ever harder. The climate crisis casts a deep shadow over investments (not to say human lives) over the following 25 years.”
A yr ago, the Commissioners and Pensions Board announced that they might be removing Shell, BP, and other oil and gas firms from their investment portfolios, because those corporations weren’t reducing their carbon emissions quickly enough (News, 23 June 2023). The investment bodies were instructed by the General Synod in 2018 to disinvest from fossil-fuel corporations by 2023 unless the latter could prove that they were on the trail to tackling climate change, in keeping with the Paris Agreement (News, 13 July 2018).
At the beginning of last yr, the Commissioners pledged £100 million to create an investment fund that may ultimately aid communities harmed by transatlantic chattel slavery (News, 10 January 2023). This followed a means of analysing the extent to which Queen Anne’s Bounty, a part of the endowment now managed by the Church Commissioners, had been invested within the slave trade.
An Oversight Group was arrange, and a worldwide survey conducted, the findings of which were published in March; the Commissioners announced that they might be in search of partners to construct the fund to £1 billion (News, 8 March).
Archbishop Welby’s foreword also features a defence of this. He writes: “Our response shouldn’t be about compensation for people. The individuals who suffered these horrors are long gone – their lives blighted, brutalised, and cut short — and nothing can erase the pain they endured. For the Church Commissioners, that is about in search of the reality, taking responsibility, and living as much as its values. Neither is it about apologising for spreading the gospel, as some have claimed — nothing might be farther from the reality. It is our calling to share the excellent news of Jesus Christ.”
