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Church of England's Defence Investment Policy Evolves to 'More Nuanced' Approach

The Church Commissioners, the investment arm of the Church of England, is shifting towards a more nuanced evaluation of its defence-related investments, moving away from a single blanket threshold across the sector and globally.

The endowment fund, which manages over £9.2 billion in assets, has updated its defence investment policy to take a more tailored approach. Rather than applying a universal exclusion on all companies deriving more than 10% of their revenue from defence activities, the Church Commissioners will now assess each investment on a case-by-case basis.

"We have moved to a more nuanced approach that looks at the specific nature of a company's defence-related activities, the proportion of revenue derived from those activities, and how that aligns with our ethical investment policies," said a spokesperson for the Church Commissioners.

The shift reflects a growing recognition among institutional investors that a one-size-fits-all approach to defence sector investments may not be appropriate. "There is an acknowledgement that the defence industry encompasses a wide range of activities, from weapons manufacturing to more humanitarian-focused areas like cybersecurity and disaster relief," said an industry source familiar with the Church Commissioners' updated policy.

The Church Commissioners' new framework will evaluate factors such as a company's overall business mix, the nature of its defence contracts, and its alignment with the Church's ethical investment principles. This could allow the fund to maintain exposure to certain defence firms that derive only a small portion of revenue from activities deemed acceptable, while excluding those with a heavier weapons focus.

"It's about trying to be more nuanced and thoughtful, rather than just having a blanket exclusion," the source added. "There's a recognition that defence isn't a monolithic industry, and that a more tailored approach is needed."

The updated policy comes as institutional investors face growing pressure to align their portfolios with environmental, social and governance (ESG) considerations. The Church Commissioners' move signals that even sectors traditionally viewed as ethically complex, like defence, are subject to evolving investment approaches aimed at balancing ethical concerns with portfolio diversification.