In recent years, as charity investments have come under increased scrutiny, many charities have begun divesting from companies whose work contradicts their mission. However, it can be difficult to find alternative companies to invest in.
One answer is to pursue a responsible investment strategy, which involves screening out the least compatible companies in your portfolio and engaging with the rest to get them to act in ways that support your charity’s mission.
For example, a charity dedicated to tackling inequality could ask companies they are invested in to pay all workers the living wage and reduce excessive pay for directors. Similarly, an environmental charity could ask investee companies to cut their carbon emissions or improve their environmental management practices.
A charity pursuing responsible investment may find it useful to develop a policy. This helps organisations ensure their investments support their mission, incorporates responsible investment into their operational planning, and helps guide the charity’s investment managers. . Here’s where to begin.
Consult across your organisation
Get the whole organisation involved when creating a responsible investment policy. This ensures it supports everyone’s work and is properly resourced.
Engage with your investments
Charities can engage with the companies they are invested in by encouraging them to change their practices. Most charities hold investments in FTSE 100 companies so getting even one investee company to cut carbon emissions or pay the living wage can have a huge impact. Here are some ways to do it:
- Send letters or write directly to companies
- Hold a meeting with company board members or the investor relations team
- Attend a company’s annual general meeting
- File a shareholder resolution
- Publicly express concern
Work with asset managers
Most charities manage their investments through an asset manager who can engage with companies on behalf of shareholders and often has a lot of influence. Getting an asset manager to engage with companies can have a big impact. Make sure you make the most of them:
- Select asset managers who are committed to responsible investment, through their own responsible investment policy or by signing up to the Principles for Responsible Investment or Stewardship Code
- Advise managers on engagement activities
- Encourage asset managers to provide regular reports on their engagement and voting activity, and how it supports your responsible investment policy
Work with other investors
Charities are small players in the investment world so getting your views across can be difficult. You are more likely to be heard if you work with other investors who have a similar mission, for example by signing joint letters or filing shareholder resolutions A good way to work with other investors is through networks, such as:
- Charities Responsible Investment Network
- Church Investors Group
- Carbon Disclosure Project
- Institutional Investors Group on Climate Change
- Principles for Responsible Investment
Tell the world
The more charities ask their investee companies to improve their practices, the greater the chance they will do so. Consider putting information about your responsible investment activities on your website or in your annual report.
Jo Mountford is the responsible investment officer at ShareAction.org, which has published a guide on how charities can create responsible investment policies. The full guide can be downloaded here.
If you work in the charity sector, please join our free network for charity professionals.
