Art by Chris Buzelli

Innovation can come from blending and managing goals that can sometimes be at odds with each other. Tom Joy has done exactly that over the last year. The chief investment officer delivered superb returns, remained vigilant about risks in the market, and did so while hitting the vaunted ethical aims central to his organization.

As for the returns, they totaled 17.1% over the year “despite maintaining a relatively defensive position,” Joy told CIO. “There were many factors that contributed to this, but what I was proudest about was the successful active management across the board, particularly in real estate.”

Being on top of signs of complacency in the market is key. “We see many signs in the markets of investors focusing too much on the return side of the equation and not enough on the risks,” Joy said. “We also feel it is a very good environment for active management and currently hold very few passive investments, despite the current growing popularity of passive.”

The high valuations facing investors after last year’s run-up in risk assets is another major consideration. “We retain genuine diversification across a broad range of assets classes, as a look at our asset allocation will show. We are defensively positioned across and within asset classes, holding high cash balances,” Joy said. “Finally, we focus on managing stakeholder expectations after such a great run—the length of the cycle and the level of valuations of risk assets mean, in our view, that future returns will be much lower.”

The stellar investment returns come as Joy supports his organization’s mission. “As the main national investing body of the Church of England, we seek to align the way we invest with the ethical values of the Church,” Joy said. “It is our aim to be at the forefront of responsible investment and we engage with our managers across a complex portfolio on their incorporation of ESG into their processes.

“We have a head of responsible investment to lead this work, and received the highest rating, A+, from the UN-backed Principles for Responsible Investment this year for our responsible investment strategy and governance.”

Climate change is a key initiative. “The transition to a low-carbon economy is our most-­important responsible investment objective,” Joy said. He noted two major wins this year. The first was the launch of the Transition Pathway Initiative in January, developed with the Environment Agency Pension Fund and the Grantham Institute at the London School of Economics to track the alignment of companies with goals of the Paris Agreement and the National Determined Contributions submitted by governments. The second accomplishment was the passing of a proposal in May with 62% of the Church’s shareholders support, asking ExxonMobil to improve its climate change-related disclosure. “This was an unprecedented signal from investors on the need for businesses to address climate-
related risk,” Joy said.

Having a great team is key to innovation. “As investment is all about people, the thing I’m most proud about organizationally is our ability to attract great individuals to join our team,” Joy said.

Delivering superb results while being highly cognizant of risks was just part of Joy’s accomplishments for the year. Meeting his organization’s mission and expanding his team to keep performance sustainable were also key.