Acting on trust: the morality of Church investment practices

What actually happened was entirely the reverse of this. According to such press information as there is, it appears that the decision to borrow money to invest in equities with the risk of short term collapse in value was made some time around the year 2002. The net result has been an actual cash loss in endowment funds of 50 per cent, some hundreds of millions of dollars.

Peter Jensen recently said to the diocesan synod that “I do not feel that gearing was ethically dubious for example, though I had to have an argument with myself to come to that conclusion.”

Clearly gearing may well be acceptable according to the risk/profit balance for an investor with a short term strategy. But the trust obligations of the diocesan authorities are set within a very long-term horizon. Moving down the risk end of the balance is unavoidably to put the interests of the present generation above those of future generations for whom the present generation has a clear fiduciary responsibility. It represents something like generational arrogance.

Gearing might not in itself be unethical. But doing so in the context of the kinds of long term trust responsibilities of the diocesan officers is fairly clearly a moral failure of significant proportions for which someone should presumably take responsibility.

There is, however, a further and quite important issue that should attract the attention of the NSW Attorney-General. The powers given to the diocese in the Trust Property Act assume that the endowments exist for the benefit of the church over a very long period. They assume the church will outlive other bodies and trusts. The diocese appears to have signally failed to honour that assumption and to have acted like any other high risk taking investor. That should surely raise the question of whether the diocese is entitled to continue to be given the very generous powers to vary trusts which it currently enjoys under the Act.