Prevent reputation damage: Investing in particular sectors or companies could damage the reputation of your charity and the public’s perception of your work. Over the last several years there has been increasing publicity around how charities invest their money and other assets. Fundraising charities are particularly at risk of this. Investing to prevent reputational damage is likely to become increasingly important as younger generations in particular are more conscious of sustainable investing and the behaviour of companies.
Avoiding conflicts with the charity’s aims: Investments can directly counter the aims of charity. For example a health charity would want to avoid investing in alcohol. You could also decide to avoid investing in areas which indirectly counter the aims of your charity. For example, a child abuse or poverty charity might want to avoid investing in alcohol because of its impact on society.
Concerns about alienating supporters, beneficiaries and/or staff: You can decide to avoid investing in some areas because of concerns from your stakeholders. For example, an environment charity might learn that its beneficiaries or staff are against unnecessary animal testing. Staff might have particular concerns about where the employee pensions are being invested.
Using Investments to further your mission: A charity’s investments can in fact be used as a tool to further its aims. For example an environment charity could invest in renewable energy, or a poverty charity could invest in educational products.
Addressing financially relevant risks: Many environmental, social and governance risks are increasingly financially relevant, and incorporating them can boost long term performance. For example there is a growing consensus that climate change will be financially significant to all companies.
Using investments to influence company behaviour: Charities can invest in companies so they are better able to engage with the company to seek to improve their responsible business practices. This can be done through unilateral discussion or through a partnership of investors. For example, a human rights charity may engage with companies it invests in to discuss their involvement in particular countries. Charities can also vote as shareholders for many of their investments.