ESG investments will become more important for charities over next three years, survey finds

A surge in interest among charity finance leaders in ensuring their investments adhere to environmental, social and governance (ESG) commitments over the next three years is being predicted.

Among 101 senior charity executives surveyed, 94 anticipate that ESG will become more important when selecting investments, with 16 saying it will become “significantly more important.

Only six of those survey believe its level of importance for their charity will not change.

Most (88) also believe ESG credentials are currently important with selecting investments in their portfolio, with more than a quarter saying it is “very important”.

“ESG and responsible investment has become more important than ever for charity trustees as they seek to align their investment portfolios to their values and purpose,” said
Nicola Toyer, head of charities at Investec Wealth and Investment, which carried out the survey.

“In our view, this is now considered equally, if not more important than investment performance.”

Board directors, investment managers and finance directors were among those surveyed. Collectively their stock market related investments are worth £4bn.

Increasing interest in prioritising ESG will put pressure on investment management advisers over the next three years, adds Investec.

While currently 60% say ESG credentials of investment managers are quite important, this proportion increases to 97% when asked how important such advice will be over the next three years.

The survey has been released two years after a landmark legal ruling that allowed charities to focus on green investments, even if it means losing out financially by excluding a large part of the market.

The Charity Commission had subsequently updated its guidance that trustees have discretion to choose investment options provided they ultimately further their charity’s purposes.

Charities to ensure their investment and banking strategy consider ESG include Christian Aid, which last year severed ties with Barclays, after it emerged it was among Europe’s largest funder of fossil fuels.