Responsible investment policies in line with charitable missions on the rise, says report

In a survey carried out by the Association of Charitable Foundations, nearly three-fifths say they have such a policy or plan to implement one

The report
The report

The number of charities that choose to adopt responsible investment policies in line with their missions has more than doubled over the past five years, a new report shows.

Intentional Investing: the Principles, Practicalities and Pitfalls, which was published today by the Association of Charitable Foundations and the investment firm Cazenove Charities, is based on a survey of 286 charities carried out between August and September last year.

It says that 59 per cent of respondents had or planned to implement a policy for managing their investments in a way that reflected their charitable missions, values, or wider social concerns; 23 per cent of respondents said they had had such a policy five years ago.

The report identifies four main things the surveyed charities did to align mission and investments. The top one was to exclude particular stocks: 78 per cent of respondents said they excluded specific industries or companies from their investment portfolios, with tobacco the most common exclusion.

In addition, 34 per cent of charities said they deliberately invested in industries that rated well in terms of environmental, social or governance factors; 22 per cent said they sought to influence corporate behaviour by using voting rights as shareholders; and 17 per cent said they tried to deliver mission-related outcomes through social investment.

The organisations were also asked what effect they thought managing their investments in this way would have on their returns. A quarter said they thought it would reduce returns, 18 per cent said they thought it would increase returns and 57 per cent said they thought it would make no difference.

The report says researchers found that charities with objects of promoting faith and religion were the most likely to have mission-driven investment policies, with 87 per cent of these charities doing so, followed by 80 per cent of those with peace and conflict resolution purposes, and 80 per cent of health-related charities.

Those least likely to have such a policy were charities with science and technology objects (27 per cent) and higher education charities (41 per cent).

The most common reasons charities gave for not adopting responsible investment policies were that their mission did not require it – cited by 53 per cent of those without such policies – followed by concerns that it would restrict their investment options (39 per cent) or hinder returns (33 per cent).

Richard Jenkins, head of policy at the ACF and co-author of the report, said: "The report advocates intentional investment, which means that trustees have thought about the management and use of their charity’s assets so that their approach supports the delivery of their charitable aims. They are able to explain their approach and, as far as possible, anticipate and review the impact of their decisions in terms of their mission and values, beneficiaries and supporters."

Kate Rogers, head of policy at Cazenove Charities, and the other co-author of the report, said: "Only trustees can be expert in what their charity needs and it is up to them to partner with an investment manager that can effectively support and achieve their objectives, enabling them to maximise charitable benefit through the use of all of their assets."

The report is available to ACF members on its website.

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