Interview

As Nature Intended

Paul Jaffe, Head of ESG for Real Assets at the Church Commissioners for England, talks about the importance of collecting “meaningful” data and taking a disciplined approach to sustainability.

It’s been two years since Paul Jaffe took his position as Head of ESG for Real Assets at the Church Commissioners for England. Prior to that, he earned his stripes in commercial real estate, including 10 years managing assets at LaSalle Investment Management and six at British Land.

“My role is to oversee the sustainability approach we take across all this: what our priorities and principles should be, which actions to take, which data to collect, and how to message that to our stakeholders,” he said, reflecting on his incumbent role.

Upon joining the Church Commissioners, Jaffe took it upon himself to develop an innovative approach to sustainable investing in real assets, evolving from what the organisation had done historically

“What we found in creating a strategy, is that it’s not just about ‘collecting’ data – it’s about gathering meaningful information, and being able to give real insight, and convey the right tone and principles about what we’re doing,” Jaffe explained. “This is a key part of what I’ve helped develop: identifying areas where we think we can make the biggest real-world difference, and having the strength of character and leadership to say not just what we think we can do – but also what we can’t.”

The Church Commissioners currently manages a £10 billion (US$12.65 billion) endowment fund on behalf of the Church of England. Established as a charitable body in 1948, it has a strategic focus to support the Church’s mission and ministry – particularly in areas of need and opportunity, in perpetuity.

The investment body describes its mission as two-fold: creating long-term financial returns to fund mission activities through churches, cathedrals, and dioceses; and ensuring its investments benefit the wider world and contribute to “the common good”.

“What we’ve done so far is something that I think the Church Commissioners is proud of,” said Jaffe. “We don’t have the answers to everything, and we’re open to talking about challenges and improving in those areas. It’s a pledge of ours that, on behalf of our stakeholders, we continue to show our areas of focus and the actions we’re taking, and hopefully our successes as well.”

The Church Commissioners also describes itself as a “faith-based investor”, with a stewardship approach grounded in ethical policies and taking into account ESG issues – with an overarching goal of delivering long-term investment returns.

Real assets currently make up a quarter of the fund’s investment portfolio (£2.5 billion), involving a diverse range of assets – such as farmland, sustainable forestry, development land, built environment and infrastructure.

“It’s a very diverse portfolio with lots of interesting dynamics, and most of the assets are directly held by us,” said Jaffe. “Roughly 60% by value is in land in one form or another, and the other 40% is a mixture of built environment assets – residential and commercial – including investments through third-party managers, primarily in green infrastructure and renewable energy.”

Although the overwhelming majority of the Church Commissioners’ assets are UK-based, the fund does have some holdings abroad – including forestry investments in the US.

The long-term view

Since joining the Church Commissioners, Jaffe has been working on establishing a set of principles to foster long-term stewardship and value creation within the organisation.

“I work with a team that is intent on taking action, and I’m lucky that I get to spend time on what that actually looks like,” he said. “It’s important not to just sign up to everything: we try to be disciplined about what groups and pledges we adhere to.”

On the farming side, the Church Commissioners collaborates with peers such as the Duchy of Cornwall and the Crown Estate as part of the Institutional Landowners Group. The organisation is also part of the Better Buildings Partnerships – a collaboration between UK commercial property owners aiming to improve the sustainability of existing building stock – and of the Net Zero Asset Owners Alliance.

All of the fund’s forestry investments adhere to best practice certifications, which are awarded by a forest atewardship council both in the UK and US. In addition, the Church Commissioners is a signatory of the UK National Trust’s Nature-Based Solutions Compact – a set of guiding principles agreed at the 2021 Climate and Land Summit, aiming to help land managers deliver high-quality nature-based solutions.

“We do think carefully before signing on to things: these are the ones we think we can learn from, and where we think we can move the needle and help to create positive change,” said Jaffe. “It’s about challenging yourself as to what the right thing to do is, and having the confidence to say what you don’t know the answer to as well. That’s been a key part of our overall principles.”

DIY best practice

The Church Commissioners has also been creating its own guidance and policies where it has felt that those were lacking.

“As a landowner, one of the things we did from the beginning was to map out our emissions,” said Jaffe. “But we knew we would never be able to capture those entirely, as you can’t measure farming emissions accurately, even where you have contractual control.”

Jaffe and his team have strived to work out the largest emissions profile among the organisation’s  farming assets, which it estimated at roughly 100,000 tonnes of carbon per annum – compared to about six for its buildings. Meanwhile, its forestry assets absorb roughly 100,000 tonnes of carbon per year.

Based on the recognition that carbon emissions could not be measured in full confidence, the team also took a collaborative approach with farmers to tackle the issue.

“We are setting about surveying our farming tenants on emissions profile, asking them a series of questions to understand their approach to sustainability and views on regenerative farming,” said Jaffe. “We’re getting insightful input from them, which we can use to talk about what’s going on in our portfolio. There has been an overwhelmingly positive view towards regenerative farming and positive actions to improve biodiversity, which we’re keen to bring forward.”

This collaboration was also an opportunity for the Church Commissioners to hear about challenges encountered by farmers, and work out where it could help in its landowner capacity. Some farmers, for instance, reported being confused about new government stewardship schemes, or were keen to learn about peer practices.

“We don’t want to write guidance and policies for the sake of it – we want to do it where we think they may allow us to move things forward and create consistency,” Jaffe explained. “For example, we felt there wasn’t a go-to best practice framework on how to deliver housing as a landowner. So we’re writing our own and creating standards we feel we can adhere to, and which others may want to adopt.”

The key question that investors should ask themselves, Jaffe argued, is where they are best placed to make a difference. The answer to that, however, isn’t always straightforward.

“Removing assets that produce food and turning them into something else might seem like a good idea, but it just moves a problem somewhere else,” he added. “If you stop your land with lots of grass from being used to feed cows, some might say it’s a good thing. But if the cows end up being fed in parts of the world they weren’t naturally placed to on, you may have to think again.”

Working with farming tenants to improve and increase the adoption of regenerative farming techniques is one part of the job, but there’s more to ensuring sustainable business and food production practices.

“That doesn’t mean turning all our land over to trees or solar farms, but it does mean using it appropriately to create sustainable communities and increase the amount of renewable energy we can get from it,” Jaffe continued. “We’ve already got some major wind farms on there, and are looking to see if we can have more.”

Adverse conditions

The UK political scene has been marked over the past few months by major U-turns both from the ruling Conservative party and Labour opposition party on their respective green agendas.

As such, one may wonder whether this has impacted long-term asset owners’ sustainable investment plans.

“The collective experience we’re hearing as part of the groups we are involved in, is that investors crave certainty,” said Jaffe. “There is a genuine willingness to invest sustainably, and it is much easier to do so when you have certainty of frameworks and legal requirements, and when the playing field is level.”

Among the biggest policy changes decided by Prime Minister Rishi Sunak last September, the UK pushed backed the deadline for ceasing to sell petrol and diesel cars and phasing out gas boilers, prompting strong criticism from the automotive and energy industries.

“When the government rolls back on various expected policies relating to energy performance, it has a negative impact on our ability to take those things forward,” said Jaffe. “It does not help when regulations that everyone is working towards do not come into effect, and certainly makes it a lot harder to achieve short-term targets in the same way.”

As it relates to buildings, for instance, the Church Commissioners has been struggling to accelerate transition planning in the absence of a legislative backdrop requiring asset upgrades.

Regardless of these conditions, investors continue to share the view that sustainability is here to stay, and as such – their long-term thinking and priorities remain unchanged, Jaffe assured.

“From an investor perspective, achieving net zero by 2050 it is the number one topic, and the fundamentals of that and our commitments haven’t changed,” he said. “We still believe that, to a large extent, long-term stewardship and value are linked, and that investing in energy efficiency is the right thing to do. The willingness and desire are there, but exactly how to do it, and what sort of trade-offs may be entailed, is less certain.”

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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