Writing a responsible investment policy statement for charities

13 January 2020

Writing a responsible investment policy can be daunting and offering advice in this area is not always straightforward, given the subjective nature of the task. From our experience of working with numerous charities, we have seen this task being carried out in a number of different ways. Some charities leave it to the sole discretion of the Board and its Trustees, whilst others have consulted stakeholders across their organisation, to ensure the finalised document reflects the views of the entire charity. Whatever your wider approach, we can suggest the following five steps as a way to get you in the right mind-set to complete your charity’s responsible investment policy statement.  

Step 1: Look at the Bigger Picture

Start by asking yourself a few straightforward questions: ‘how do we see ourselves as an organisation?’, ‘what themes are important to us?’, ‘who will be affected by our policy?’ This will help you to take a step back and think about the bigger picture of what you want to achieve, rather than diving headfirst into the finer details.

Step 2: Align your Thinking

Think about what your policy statement might include. It is important to acknowledge the type of responsible investor you are as an organisation, and to consider your policy in respect of your overall investment objectives including capital preservation, growth and income. Do you have positive intentions that can be reflected in your portfolio? Or are you more interested in exclusionary screening, removing investments that are conflicted with your mission as a charity? Creating ‘red areas’ and ‘grey areas’ can often help. ‘Red areas’ are no-go zones that you as a charity will simply not tolerate. These may include tobacco, alcohol, or animal testing, for example. ‘Grey areas’ include investments which the charity would rather have limited exposure to, but needn’t wholly divest from. This ensures you are not applying an unnecessarily stringent approach and keeps your investments aligned with your charity and its purpose.

It is a common misconception that investing in a responsible and sustainable way enhances risk and sacrifices return. In fact, it does quite the opposite. 

Step 3: Have a Goal in Mind

Think about the end goal. Finalising and publishing your policy statement will have implications on the way you, or your investment manager, invests. What you set in stone initially will have ramifications later down the line and so being sensible, realistic and true to your charity’s purpose is crucial.

Step 4: Ask Lots of Questions

Challenge your investment manager. Ensuring your chosen manager adheres to your finalised responsible investment policy is key to fulfilling your mission through your investments. Remember that this is a very specialist area, one that everybody will now tell you they are a specialist in. A first question might be to ask your manager to define ethical / responsible / sustainable investing and what it means to them. Other questions to ask include:

  • How do they research and screen their investments? Is there in-house expertise?
  • How do they ensure continued compliance with any criteria?
  • If an existing product has recently been labelled ‘ESG’ or ‘sustainable’ how much of the portfolio changed? What investments were sold? 
  • How and what will they report to you? Does it include responsible investment case studies?
  • If they vote responsibly, is it on all holdings or only those marked as ‘ethical’?
  • Are they active shareholders? How do they engage with their holdings? Are they contributing to any investor coalitions?
  • Do they carbon footprint their portfolios? How do they use the results?


Step 5: Excite your Stakeholders

How will you communicate your policy internally and externally? This can be a good opportunity to energise your employees and stakeholders by demonstrating the impact you are having as a charity, through your investments. 

In order to excite your employees and stakeholders with your new responsible approach, pick out a few companies you invest in and highlight the positive contribution they are making to society. EdenTree’s Global Equity Fund for Charities, one of the best performing funds of its type in the UK market over the last three years, invests in a number of companies that are setting the standard for others. Importantly, these companies are yielding strong returns for investors. For example, Medtronic, a company which designed the world’s smallest pacemaker has grown its dividend per share for over forty years, increasing nearly 300% over the last decade. Another example is GlaxoSmithKline (GSK), which retains first place in the ATM (Access to Medicine Index) for the sixth consecutive year. GSK has led the way in the eradication of polio and significantly improved access to HIV medication. DSM, another EdenTree holding, aims to reduce methane output of cows by over 25%, equalling the Co2 emissions from the electricity use of 5.5m homes per year, or the equivalent to lighting Switzerland and Denmark. These are companies that charity investors can be proud to hold in their portfolio.

It is a common misconception that investing in a responsible and sustainable way enhances risk and sacrifices return. In fact, it does quite the opposite. Investing responsibly is undoubtedly a value-adding approach, and investing in the businesses that are leading the way for many others, ensures a reduction of risk and enhancement of return in the long term. With a responsible investment approach, EdenTree believe charities can have profit with principles.

This is the second of two blogs where we aim to summarise some of the key takeaways from our recent charity ‘Ethical Toolkit’ seminar. Part I, ‘How can charities approach responsible investing for the first time’ can be read here.

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