Tuesday, 10 December 2013

Ethical Investment

Time to pull our socks up.  The Panorama programme this evening, which in many aspects was rather thin, has nevertheless highlighted an issue the sector needs to grapple with.

When organisations have endowments (like many Foundations) or big reserves they must invest these both for the good of their beneficiaries, and ethically, for the wider good.

Charity Commission advice used to be too blunt and unhelpful: that trustees should only invest for the maximum return. Now their advice (CC 14 to be precise) is more nuanced and encourages 'mission driven' investment. Not enough charities are taking notice of this new more flexible approach. They need to.

Because, quite simply, it doesn’t seem right that charities invest in tobacco or arms companies.

We need more people in the sector looking seriously at ethically managed funds. The argument is that they don't give as good a return. But you might be surprised to learn the size and strength of the ethical investment industry. There is around $34 trillion under management in funds that subscribe to the UN’s Principles for Responsible Investment. That’s about a third of all money under managed funds anywhere in the world. So there’s plenty of choice and we expect that choice to grow.

Impact investment funds, though in their infancy now, may also become an investment option of choice for charities further down the line. Why shouldn't our sector be looking at how we can expand opportunities for social finance; for loans to develop and grow our sector

So, I'm giving our sector and those associated with it a call to action. I have two messages.

One is to the fund managers themselves. Why are you not alerting your charities to ethical problems with proposed investments?  Before you put our money into an investment you think raises issues then consult the charity trustees responsible. Fund management companies need to get their act together and understand the ethics of their investment decisions.

Secondly, to charities. Charities traditionally delegate their investment decisions to a sub committee and they in turn appoint fund managers. So many trustees simply do not know where their investments go. Time for the full board to review investment policy. The full board should review the Charity Commission advice and question whether they are investing in line with their mission and with their own ethos.

The sector needs to do more to engage with ethical investment principles. Ensuring that their investments conform to the particular and the wider good will help ensure that our sector remains true to our collective mission in all aspects of our work.

This is our wake up call.

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