Church to sell pounds 31m `unethical' shares

THE CHURCH of England confirmed yesterday that it is to sell pounds 31m of shares in GEC to avoid attacks from critics who say church funds should not be invested in firms which have links to arms manufacturing.

Church Commissioners, who insist that the disinvestment is an ethical rather than a business decision, said they plan to sell the shares after British Aerospace takes over the company's defence division, Marconi Electric Systems, later this year.

The Church has 5.5 million shares in GEC, worth pounds 31m at today's prices. Under the terms of the takeover, announced earlier this year, the church stands to get 0.42 BAe shares for every GEC share it holds. In effect, the church would end up holding 2.3 million shares in BAe, which manufactures the Tornado and Harrier aircraft, both currently being used in the Nato bombardment of Kosovo.

BAe also owns the Royal Ordnance business, which manufactures munitions and Heckler and Koch which builds mortars, assault rifles, machine guns, bombs and missiles. In addition to its equipment being used in the Balkans, the company has supplied Hawk aircraft to the government of Indonesia, which invaded East Timor 24 years ago.

The decision to disinvest was made by Anthony Hardy, the investment manager of the Church Commissioners, but a spokesman said it was not new policy. "We have never owned shares in British Aerospace, so this is no change," he said.

William Beaver, the director of communications for the Church of England, said: "We are not afraid of investing in companies that make equipment for Nato or Commonwealth countries, but we do not generally support companies that make commercial decisions on a wider criteria."

The Church of England's investments are handled by the Church Commissioners and are worth a total of pounds 3.6bn.

Mr Beaver said that investment decisions were made on two criteria; ethics and returns, and the sale of the GEC shares was ethical.

"It will be done over a course of time when the share prices are right," he said.

The news of the share sell-off is likely to anger BAe directors but it is not known whether the decision will affect share prices.

This will be the first time that the Church has disinvested from an arms manufacturer but it has been criticised in the past for its financial relations with such companies.

Two years ago, it emerged that Lockheed Martin, which produces stealth bombers, Trident submarines and armour-piercing explosive darts, had paid pounds 15,000 to use a concert held at St Paul's Cathedral to provide corporate hospitality fordefence contractors.

The deal to sponsor the concert, which was held as part of the cathedral's tercentenary celebrations, was struck by Lockheed Martin Tactical Systems, a Portsmouth-based subsidiary and the concert was used to entertain defence contractors, such as BAe, GEC and Racal. But a spokesman for the cathedral said it needed sponsorship and had been delighted to receive it.

Research carried out by the Campaign Against the Arms Trade, which was released in 1995, showed that around 90 churches and parishes, and a number of other Christian organisations, had held millions of pounds worth of shares in companies making arms or defence equipment.