Published by ACF, co-written by Kate Rogers.
The Principles, Practicalities and Pitfalls
The report, published by the Association of Charitable Foundations (ACF) and Cazenove Charities in June 2015, examines whether and how to develop a charity's investment strategy with its values and aims in mind. It draws on research from the largest survey into current charity investment practice, with almost 300 respondents, and finds that 59% of charity investors are choosing to manage their investments in a way that is aligned with their mission.
From minority to mainstream
Our research shows that over the last five years thinking about investments with mission in mind has moved from being a minority concern to an accepted part of mainstream practice The report, which draws on a number of focus groups and individual interviews as well as the survey data, identifies a number of key drivers for the increased uptake, including younger trustees and the shifting tide of public opinion.
Reflecting mission and values in investments - the options
The report identifies four main ‘behaviours’ to connect mission and aims to investments – exclude, select, influence, deliver. 78% of respondents with a policy were excluding specific industries or companies from their investment portfolio, with tobacco the most common exclusion. By contrast, 34% were deliberately investing in industries that rated well in terms of environmental, social or governance (ESG) factors, 22% were seeking to influence corporate behaviour by using share voting rights or engagement and 17% were looking to deliver mission related outcomes through social investment.
The impact on returns
Referencing recently published academic research, the report considers the implications of these behaviours on the likely investment returns and finds that, although the exclusion of some industries may have historically hindered performance, the overall impact on the portfolio can be relatively small. Academic evidence supports the notion that selecting companies with good environmental, social and governance policies and engaging with companies to improve corporate behaviour can be financially rewarding.
Finding the right approach for your charity
While the trend is clear, the report also shows that there is no ‘one-size-fits-all’ approach that is right for every organisation. With that in mind, 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. Intentional investors view their investments as one of a number of assets at the disposal of charity trustees, all of which can be used to deliver the charitable aims.
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The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital Management does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital Management has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital Management is a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored.