Despite a growing range, the nature of restrictions and environmental, social and corporate governance ESG considerations, there is actually no formal requirement, in the Charity Commission guidance CC14, to have any restrictions at all. However, this should not mean your portfolio should be invested with no regard for corporate behaviour.








As we know, charities need to review their investment policy regularly and it is at this stage they have the opportunity to consider whether this should include an ethical requirement. In my experience, this can begin an interesting debate.

So, to avoid factoring in the wrong considerations here are a few thoughts on which you might want to frame the debate.

Starting with your investment policy, it is important to ensure that any ethical restrictions connect with your underlying aims and that connection should be demonstrated in your investment policy.  We cannot simply decide not to invest because of fashion or political pressure. We need to demonstrate our reasons align with our mission and how it is achieved.

Consider your investment universe and return objectives

Restrictions could reduce the range of investments available and may have an impact on returns. Moreover, each board of trustees will need to consider what level of materiality matters to them. For example, does a prohibition on investing in tobacco mean not investing in those who retail it?

It may sound obvious, however if your investment managers are doing their job properly they should avoid companies who behave badly regardless.  This is because companies, who are poor corporate citizens, are likely to face substantial sanctions from national governments and risk losing a large number of both potential and existing customers. These issues will not only tie up executive time, which could be spent elsewhere on improving the business, but also should result in significantly lower profitability.  Therefore any investment manager looking to generate good returns should avoid them

Whatever the final decision, investment managers should be taking issues such as governance, sustainability and attitude to corporate responsibility into account in and therefore our portfolios should reflect a concern over these issues.

What is your experience?

We would love to hear from you about how you and your charity board are tackling the complexity of ESG.


Andrew Wauchope
Senior Investment Director
020 3327 5400

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