How to make your charity’s investments go further

In 2018, charity invested assets totalled £108.4bn. Most of these are in public equities, or stocks in companies, which have a tangible impact on the world around us. But how much time does your charity dedicate to thinking about the impact of your invested assets? They have the potential to be a powerful tool for furthering your charitable mission. It is therefore worth putting in the time to develop a responsible investment policy for your charity, to ensure that you’re making the best of your investments.

Here are five key steps for a successful RI policy:

1. Build consensus

Before you start writing your RI policy, you’ll need the support of the trustees. Whether you’re looking to educate yourself, or convince others, there is a strong business case for developing a responsible investment policy:
• By aligning your investments with your mission, responsible investment allows you to use a greater proportion of your resources to support your charitable objectives.
• With a number of environmental and social indices outperforming standard benchmarks, responsible investing can protect and enhance financial returns.
• Responsible investment can protect your charity’s reputation and avoid accusations of hypocrisy, by demonstrating that ethical issues and the values of the charity have been considered in investment decisions.

2. Do the ‘big picture’ thinking

Many charities see responsible investment as an additional ‘tool’ in delivering their theory of change. The issues your policy addresses should therefore flow directly from your vision, mission and charitable objectives. Depending on your mission, you may decide to address a broad range of responsible investment themes in your policy, or focus on one or two that are most relevant. Common themes include climate change, modern slavery and corporate lobbying.

3. Get into the nitty gritty

Having set the objectives and priorities of the policy, the tools you can use to put the policy into practice fall into two categories: asset allocation and engagement.

Asset allocation is about moving your money away from companies or sectors which contradict your charitable mission (e.g. screening or divestment) and/or investing in companies or sectors which further it. Engagement involves talking with companies to convince them to change their practices in line with your charity’s vision. Asset allocation and engagement can also be used together – for example, divestment is often seen as a last resort for companies who repeatedly fail to respond to engagement.

4. Spread the word

Developing a responsible investment policy is exciting, so don’t keep it a secret – shout about it. For example, don’t keep your asset manager in the dark. They are responsible for implementing your investment policies. You may also wish to raise awareness among your staff and beneficiaries of the positive impact that the RI policy has on your charitable objectives.

5. Don’t forget about it

After you’ve successfully drafted, signed off and implemented your policy, it may be tempting to breathe a sigh of relief and hope your asset manager will do the heavy lifting from there. However, your responsible investment policy should be a ‘living document’ – continually open to discussion and amendment to stay current. To ensure this, set regular dates to review both the policy and your asset manager’s implementation of it, with your team and board.

Isobel Mitchell is network officer for the Charities Responsible Investment Network

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