With a cross placed prominently on its office wall, Epworth Investment Management (Epworth) makes no secret of its Christian heritage, which defines its entire approach to investing.

As a wholly owned subsidiary of the central finance board of the Methodist church, the investment management group has provided charities with the opportunity to ethically invest and benefit from sustainable returns since 1996 - all in line with the teachings of its faith.

Currently, the regulated company is home to six charity authorised investment funds (CAIFs), which cover the breadth of the investment landscape – offering prospective clients’ investments in UK equities, corporate bonds, sovereign bonds, affirmative deposits, global equities and the multi-asset space. As it stands, Epworth represents approximately £1.4 billion in assets under management.

Stephen Beer, chief investment officer for the investment management group, believes that the company successfully straddles two worlds, being both a charity-focused organisation and a City institution. The office is not only decorated with Christian symbols, as rows of computers are operated by a predominantly home-grown team of investment professionals consulting Bloomberg for fund information in one window, while analysing potential holdings and stocks for respective funds in another.

“I suspect we are the only fund management team where you might find a fund manager writing about some theology and then in the same paper be talking about how we should engage with companies on specific metrics,” he explains. “That is what we are trying to do: integrate the two together.”

The CAIF funds are a new development for Epworth, having been launched in the summer of 2019 as a replacement for its common investment funds. From an investor perspective, the main difference is that common investment funds were regulated by the charity commission, while CAIFs are non-UCITS funds overseen by the Financial Conduct Authority (FCA).

“We wanted to give our existing clients a menu of options and add a global fund. CAIF seemed to be the right route. It is one that is increasingly becoming better understood as a type of fund,” argues Mr Beer.

“Obviously every charity trustee has to be able to make their own decisions about how to invest and what is suitable for them, but CAIFS are very well set up for charities,” he adds.

The client base and the unit holders of its CAIF funds include includes church denominations, religious charities and non-religious charities, with minimum investments typically starting at £1,000. Registered charities can invest in units of selected funds or enter into specific client arrangements with Epworth.

Performance remains difficult to fully gauge less than a full year from the launch, although the intention is to beat the assigned, unconstrained benchmarks given to each fund even with the ethical criteria attached to its stock selection.

Interestingly, Epworth takes a holistic view of fund management, eschewing conventional practice of assigned fund managers to instead collectively hold responsibility for the performance of the funds.

As a team, Epworth assess and screen stocks that it perceives as unethical and going against the foundations of its faith. For its information needs, it consults multiple sources including Sustainalytics and data it directly requests from companies.

The team screens stocks and holdings it regards as unethical, inclduing tobacco, alcohol, weapons, and companies failing to pay its staff the living wage and ensure worker’s rights. Approximately 13 percent of the UK’s market value is excluded through its in-house screening process.

Outlining Epworth’s approach, Mr Beer says: “We do not have a separate group of ethical analysts who tell the fund manager what they can and cannot invest in. The fund management team is responsible for the ethics as well. When we are looking at companies, we are looking at the ethics, at the same time the team is doing thematic research on issues such as climate change.”

It also takes into account the annual Methodist Conference, and the views of its advisory committee, which has in particular driven its focus towards climate change, where Epworth currently has three policies.

He says: “One is focused on both engagement and the overall carbon footprint of a portfolio, one is focused on electricity generated in companies and their emissions intensity, and one on fossil fuels generally. We are currently working on a fourth, which is examining all the oil and gas and mining sectors to see how well those companies are aligned with below two degrees.”

These policies do result in tangible exclusions to its monthly evolving list of unsustainable stocks. Epworth excluded Glencore because due to its coal exposure, and Exxon when it launched its new global fund.

Where Epworth differs most from conventional sustainable funds and ESG-focused asset managers is in its Christian sense of stewardship, which does more than simply legitimise its stock-screening with a sense of spiritualism. Instead, it pushes to take activist positions. Earlier this year, the company wrote to Ted Baker to demand an investigation into allegations against company founder Ray Kelvin, after 300 staff members signed a petition complaining about his inappropriate behaviour. Owning a minor stake in the company, it demanded a total change in its corporate culture.

“Our engagement profile is a bit different from where the ESG community tends to be, although we quite often find them catching up with us,” says Mr Beer.

He also believes that ESG-compliance had to be driven by an internal, company-driven outlook on key investment themes.

He argues: “What I often to say to people about ESG funds is - whose ethics? Just deciding to be in an ESG fund is not enough. There are a lot of other questions you need to ask. Just like with a normal investment, no one just says they want to invest money in a fund. They ask what themselves what their investment objectives are, and what they are trying to achieve?”

This view was echoed in his position on the UN’s oft-cited sustainable development goals, which he notes are not specifically aimed at the investment community.

“They can be quite general, and as a potential investor, and you have to ask if fund managers are using SDGs to tick boxes?” explains Mr Beer. “Lots of companies might be able to do that. Are they positively thinking about how ethical aims can be implemented?”

Explaining Epworth’s divergence, he says: “We are very interested in how a company is run, and that actually means as an individual running it - this means having some accountability. There is not fence to sit on, everything has an ethical profile of one sort or another. The question is, is it right or wrong? When we talk to management and chief executives, we are able to ask them directly if they are personally satisfied with how the company is being run?”

“We accept we may not always get it right. We are not saying our portfolio is the perfect portfolio. What we are saying is we are on this journey and think that it is the right direction.”