Guidance says foundations should seek to influence investment behaviour

A paper from the Association of Charitable Foundations says there is an opportunity to push for systemic change in the financial and regulatory system

Charitable foundations should seek to positively influence the behaviour of others with regard to investments, new guidance recommends. 

Investment: The Pillars of Stronger Foundation Practice is the fifth publication from the Association of Charitable Foundations’ Stronger Foundations initiative, which was set up in 2017 to help foundations identify and pursue excellent practice. 

The report, published today, says foundations have an opportunity to push for systemic change in the financial and regulatory system in a way that charities without capital cannot.

Foundations can use their investments to push for positive changes in areas such as workers’ rights and the climate crisis, says the report, which is based on a year-long inquiry conducted by a working group of foundation representatives. 

It says that, although foundations are only a small proportion of the total UK investment market, they can “exert outsize influence” within the investment management industry and beyond.

“Many investment managers already offer specific charitable products in response to demand from charities, and in some instances these are being offered to other large investors and the general public,” it says. 

“Foundations are valuable long-term clients, willing to pay for the additional expertise required to invest in responsible, sustainable and impact-driven ways. 

“This means foundations can explore opportunities for advocacy and leverage, engaging with investment managers to push for more action on key issues, for example workers’ rights or the climate crisis.”

The report sets out six other characteristics of excellent practice, including prioritising mission when setting investment objectives, holding investment managers to account, pursuing transparency and responding to scrutiny.

Carol Mack, chief executive of the ACF, said: “Society is demanding ever greater transparency from institutions and asset holders about the sources of that wealth and how it is invested and stewarded. 

“With this offering, we aim to show how foundations of any size can approach their investments with mission at the forefront of their thinking, whatever that mission may be. 

“Thinking about investments is not the preserve of large foundations, nor of those trustees with specific expertise; it is relevant to all foundations looking to maximise the impact of their resources.”

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