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Press Releases - Thematic Studies - 26/04/2013

Are charity pooled funds responding to charities’ investment needs?

Only a minority of common investment funds (CIFs) consider issues outside of the traditional ‘sin stocks’ of tobacco, alcohol, gambling, military and pornography, according to the EIRIS Foundation’s latest report, the 3rd edition of the guide ‘Responsible investment in pooled funds: A guide for charity trustees’, sponsored by CCLA.

However, compared to the 2nd edition of this guide in 2009, a higher number of the fund managers included in the EIRIS Foundation’s survey in 2013 provided details of a clear policy on engagement, voting and / or integration. In 2013 there were also more examples of fund managers being transparent about their policies and demonstrating how they had responded to charities’ requests and needs.

The EIRIS Foundation’s guide ‘Responsible investment in pooled funds: A guide for charity trustees’ summarises the responses from the providers of forty five CIFs on their responsible investment approaches. The report is a guide to CIFs for charity trustees considering how their environmental, social, governance (ESG) and ethical concerns could be incorporated into their charity’s investment choices.

Highlights:

  • There remains a limited choice of charity pooled funds with responsible investment criteria beyond tobacco screens.
  • The funds with responsible investment criteria tend to be faith-based and focus on traditional ‘sin stocks’ such as gambling, pornography and alcohol.
  • Compared to the 2009 report, a higher number of fund managers provided details of a clear policy on engagement, voting or integration.
  • Given its financial relevance, all charity investors should consider how their fund manager integrates ESG risks and opportunities into their investment decisions and ownership practices.
  • Trustees may want to encourage fund managers to be more transparent and explicit about their responsible investment policies and practices.
  • Public opinion suggests that charities face risks to their reputation and income if they are found to be investing in ways that are unethical, or contrary to their aims.
  • Looking to the future, there may be increasing demand for charity pooled funds with positive screens, or with a focus on mission and impact-related investment.
  • There may be latent demand for the development of more charity pooled funds that reflect current trends in responsible investment and focus on climate change, human rights and labour standards.

The guide explains what responsible investment is, why charities should choose responsible investment, the financial and legal implications of responsible investment, how to develop a responsible investment policy and then explores various ESG issues and responsible investment strategies.

Michael Quicke, Chief Executive of CCLA, the guide’s sponsor, commented “The report is a valuable tool for charity trustees to check that their assets are being managed in line with their mission and also provides a basis for them to lobby fund managers about their attitude to responsible investment.”

Caron Bradshaw, Chief Executive at Charity Finance Group, commented “In light of the changes in the responsible investment and charity landscapes since the last report in 2009, including the Charity Commission’s revised CC14 guidance, every charity has, what I would describe as, a duty to now at least consider whether ethical or responsible investment is appropriate for them. This report will help charities explore some of the options available.”

John O’Reilly, Chair of the EIRIS Foundation, commented: “The EIRIS Foundation’s mission is to promote and facilitate responsible investment. This report is one example of how we work to make responsible investment more widely practised and try to encourage charities and NGOs to explore how best they can influence the direction of responsible investment.”

Above all, the guide emphasises that as fund managers are only likely to develop new funds or adapt the policies of existing funds if they perceive that there is a demand from charities, charities should communicate clearly to fund managers and advisers if there are no charity pooled funds which meet their responsible investment objectives. The charity sector is diverse and a wide range of investment products are needed to meet its needs, both in terms of financial and ESG criteria.

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icon-download-34x36 Responsible Investment in Pooled Funds A guide for charity trustees
Keywords : ESG, United Kingdom