Do charity-specific investment funds reflect charity values?

EIRIS Foundation launch new report on responsible investment in charity pooled funds  

The EIRIS Foundation has today launched a report which outlines the responsible investment policies of charity-specific pooled funds in the UK. These funds represent approximately £19.4 billion1 of charity investments. 

The research finds that 67% of funds now employ negative screens beyond a tobacco screen, this is up from 36% of funds in 2013. There has also been an increase in the number of funds applying positive screens which has grown from 20% to 30%.  Reflecting the positive momentum on Environmental Social and Governance (ESG) integration and engagement more generally, fund managers have provided much more comprehensive and explicit responses about how they use ESG factors to identify investment risk or opportunity than in 2013 

Negative screening policies still largely focus on ‘sin stocks’ (tobacco, alcohol, armaments, gambling and pornography) despite a growing demand for broader considerations. There are still a significant proportion of funds (nearly 20%) that don’t have any screening policy hence some top 10 holdings examples which include arms companies, tobacco companies and large fossil-fuel companies.  

Despite the growth in the number of charities adopting and debating fossil-free exclusions2, the proportion of funds that take this approach is low, only half of funds have some kind of explicit climate change-related exclusion and this rarely entails a completely fossil-free approach. 

Generally the report reflects the fact that charity-specific pooled funds, representing around 17.5% of all charity investments in the UK, could be better at demonstrating innovation and developments which have taken place in the rapidly evolving responsible investment and ESG sector. There are also some clear examples of best practice and a number of funds with far more comprehensive policies than others. Charites who currently hold or who are looking to hold these funds need to ensure that they are choosing the products that best align their money and mission.   

Lisa Stonestreet, Head of Communications & Charity Impact at the EIRIS Foundation and the author of the report said: 

“We believe that charities, whether through their own investment choices or through their influence and engagement with the finance sector, have a vital role to play in the transformation to a more sustainable and equitable economy. Charity pooled funds could, collectively, be a force for progressive responsible investment practices. There is definitely scope for better collaboration and communication between charities and fund managers to drive change. The scale and urgency of  current problems we face, such as climate change and biodiversity loss, demand bold solutions and approaches that are not evident in all the funds we have examined.” 

James Corah, Head of Responsible & Ethical Investment at CCLA said:  

“Whilst the growth in Environmental, Social and Governance investing should be celebrated it has largely focussed on ‘value’ rather than ‘values’. Charities are well placed to lead the push for an investment industry that goes beyond metrics to deliver real and lasting change. This report acts as a wake-up call that more needs to be done” 

Read the full report: https://eirisfoundation.org/wp-content/uploads/2021/02/Charity-Pooled-Funds-Report.pdf

-ENDS- 

Contact: Lisa Stonestreet lisa.stonestreet@eirisfoundation.org  

1 Charity Finance Pooled Funds Survey 2020 
2The 2020 Newton Charity Investment Survey found that 51% of charities had either excluded, or debated excluding, fossil-fuels. Up from 29% in 2015.  

Notes to Editor 

About the EIRIS Foundation 

The EIRIS Foundation is a charity registered in England and Wales working in the area of responsible investment. The Foundation has over 30 years’ experience of providing free and objective information on ethical finance and corporate activity to other charities and the public. 

Its mission is to use research, analysis and influence to identify gaps, barriers, opportunities and enablers so that we can help organisations and individuals maximise their contribution to the responsible business and investment agenda. For more information please visit: www.eirisfoundation.org.  

About this research and report 

Using Charity Finance’s Charity Pooled Funds Survey 2020 data as a basis for the list of charity-specific investment funds the EIRIS Foundation contacted all of the providers listed to ask for information about their funds, particularly information on any responsible investment policy and approach. Only funds that that are exclusively available to charity investors have been included. The majority, but not all, are Common Investment Funds (CIFs) and Charity Authorised Investment Funds (CAIFs). Information was obtained on most funds however 4 of the 19 fund providers did not provide us with any information. In these cases, we have used publicly available information to complete the tables. Before this guide was published, each fund manager was given an opportunity to comment on the information regarding their funds.  

CCLA provided the EIRIS Foundation with financial support to assist the updating and design of this report. CCLA had no editorial or other control over the report’s methodology or content