Not enough charities investing responsibly
Howard Lake | 13 May 2003 | News
Sixty per cent of the UK’s largest charities have no written ethical or socially responsible investment policy according to a new report.
The report, “Do UK Charities Invest Responsibly?”, explores the investment policies and practices of the UK voluntary sector and in particular, the extent to which its funds are invested in a socially responsible or ethical way. Its author is Duncan Green, Head of Research at Just Pensions.
A collaboration between Just Pensions, CAF (Charities Aid Foundation), and EIRIS (Ethical Investment Research Service), the report is based on a survey of over 100 of the UK’s largest charities and foundations, together with in-depth interviews with a number of key informants.
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In 2001 the sector had over £68 billion of assets, of which £47 billion was invested in equities and bonds. Overwhelmingly (96%), the charities with a formal policy opted to screen out stocks such as tobacco and arms but did not engage directly with companies by, for example, voting their shares at AGMs or discussing ways to improve social and environmental performance.
Risk to reputation was the major consideration for those charities with an ethical or SRI policy, while staff morale, the charities’ wider role in society and peer pressure from other charities also featured.
The main obstacle to investing responsibly was trustees’ perception that ethical or SRI policies could lead to lower returns and therefore harm charities’ ability to fund their work.
A third of those charities with no policy said that they are planning to address the issue in the next 12 months.
The research comes in the wake of proposals by the UK Government suggesting that large charities should follow the example of pension funds by reporting on the extent of their policies on social, environmental and ethical issues. In addition, the Charity Commission has given new encouragement to trustees to develop policies for ethical and socially responsible investment.
Duncan Green, Head of Research for Just Pensions and author of the report, said: “The findings of this report are worrying. Many charities could face serious risks to their reputations if they fail to address these issues.”
Cathy Pharoah, Director of Research at CAF added: “There are some major pioneers of ethical and SRI within the sector. But with over 40% of the general public saying they would prefer to support charities that invest ethically, and a further 14% only prepared to donate to charities that invest in this way, there is scope to go further still.”
The report is available for download from the Justpensions Web site.
- Charity Commission consults on draft guidance of responsible investments (12 April 2021)
- UK sees six-fold increase in social impact investment market in eight years (28 October 2010)
- CAF Investment Account £205.4 million in assets (28 August 2019)
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About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.