Charities in the UK exist to promote and provide for certain good causes or ‘charitable purposes’. Their pivotal role in society and public benefit requirement places them in an important role when it comes to shaping a more responsible and sustainable financial system. So how well are the largest charities doing when it comes to one of the most obvious steps they could take in this regard i.e. responsible investment?
We can identify some trends from looking at publicly available information about the largest 50 charities in the UK, based on 2019 income figures.
- 19 of the 50 largest organisations, almost 40%, do not mention responsible investment on their website or in their annual accounts
- Of the 31 charities that publicly reference responsible investment, 9 charities do not actually have a negative screen and 3 charities do not provide their investment policy, so it is unclear if they have divested from any industries/activities
- 7 of these charities screen out the tobacco industry and 1 fossil fuels, which leave 11 charities (just over one-fifth) who screen out more than one industry.
As the largest 50 charities are included based on yearly income, the size of their investment portfolios vary significantly in size, from the largest having £30bn in investments to the smallest having £600k. A larger investment portfolio does not necessarily correlate to greater responsible investment considerations however, as our research found that half of the ten largest investors in the largest 50 charities did not have any explicit negatives screens in their portfolio. It is clear that not enough charities have a) really thought about the long-term benefits of aligning their organisation’s values with their investments and b) really considered the importance of being vocal and transparent about what they are doing.
Is the picture any different when we focus on the largest charities by investments rather than income? The answer is, a little. In 2019, Charity Finance reviewed the top 30 largest charity investors in the UK. We had a look to see what trends we could find and whether there has been any substantial change in this space since then. 9 out of the 30 largest charity investors, almost 30%, do not mention responsible investment on their website or in their annual accounts, with a further 5 charities not having an actual screen.
Just over a third (11 charities) had negative screens for anything other than tobacco. 3 of these charities have made substantial positive changes to their responsible investment policy since this research was first published in 2019. It is encouraging to see that some charities are applying positive screens to their investments, with 5 of the 30 largest investing charities doing so.
As well as contributing to a more fair and ethical society, by investing and saving responsibly and in line with their mission, charities can go further in achieving their objectives, while reaping reputational and financial benefits. At the EIRIS Foundation we are hoping to hear directly from charities how we can help them to take further steps to managing and investing their money in more responsible ways. If you represent a charity, of whatever size, we would love to hear your views on responsible investment.