Charities believe the UK’s decision to leave the European Union will have a significant impact on charities’ investment activities, and many are reporting significant reductions in investment returns, according to a new report.
Changing Times: The 2016 Newton Charity Investment Survey, published today by Newton Investment Management, says only 17 per cent of charities think Brexit will have little or no impact on their investment activities.
By contrast, 56 per cent think Brexit will have a significant short-term impact, but with less impact in the long term.
The report is based on a survey of 80 charities, which together account for 18 per cent – or £15bn – of the charity sector’s investment assets, carried out between mid-May and the end of July 2016.
The survey focused on how charities’ investment portfolios performed over the past year, how their portfolios were allocated, whether they invested ethically, how often they used investment managers and their thoughts on the outcome of the EU referendum.
The report says charities are reporting a significant reduction in investment returns, with a third of respondents saying their investment portfolios have declined in value.
The majority of charities told researchers they expected returns of 6 per cent or less over the next few years, the report says.
Charities are also withdrawing less money to spend on their charitable objectives, the report says.
But the majority of the charities questioned said they were satisfied that their investment managers were meeting their income targets, with only 4 per cent saying they felt the income from their investment portfolio was insufficient.
Despite this, 12 per cent said their total returns were inadequate, the report says.
Environmental, social and governance factors were found to be an increasingly important part of charities’ investment decisions, with 73 per cent of those surveyed saying these factors were an important part of their investment portfolios.
Tobacco was found to be the most common exclusion from investment portfolios, for ethical reasons. The report says fossil fuel exclusions have become more popular, increasing fourfold in 12 months.
Jeremy Wells, senior investment relationship manager for charities and specialist institutions at Newton, said: "If ethical investors have historically talked about the ‘big five’ of ethical investment exclusions, it is possible that fossil fuel-free will soon join the likes of tobacco, armaments and gambling."