But charity financial advisers could do more to help ensure charities invest in line with their mission, survey finds.  
 
Latest research from the EIRIS Foundation Charity Project and the Charity Finance Directors Group (CFDG) finds that 87% of UK charities with an ethical investment policy said that their financial adviser has asked them about incorporating ethical issues within their investments. However, for those charities without an ethical investment policy, only 43% of charities said their adviser has asked about ethical investment.
 
Socially responsible investment (SRI) enables charities to invest in line with their mission, avoiding conflicts with their work and risks to their reputation. Over 90% of the general public believe that charities should invest ethically, but practice still falls a long way short of this.

Investment advisers and consultants can play a crucial role in the
decisions that charities make about their investments and whether to
consider social, environmental, ethical or governance factors. However,
some advisers have been criticised for discouraging charities from
considering ethical or socially responsible investment (SRI) and
linking their investments with mission.

Are Charity Consultants
Helping or Hindering the Development of SRI probes charity advisers’
current thinking on SRI, how they see their role in the evolving SRI
market and what would increase the take up of SRI by charity investors.
It compares the views of charities and evidence from the wider SRI
sector to explore the real and perceived barriers to change.

Key findings

§        
15% of charities without an ethical policy said that advisers were
discouraging or very discouraging. This compares to 4% of charities
with an ethical policy.
§         Some advisers do not see it as
their role to ask charity investors about SRI particularly if it is a
charity with broad aims and objectives.
§         Advisers are less
likely to ask charities about SRI if they don’t already have an ethical
investment policy – and may be more likely to be discouraging where no
such policy is in place.
§         Advisers agree that the
consideration of social and environmental risks should not harm returns
in the long-term, and could improve them. But many focus charity
clients’ attention more on short-term potential risks of
under-performance and volatility, even though studies repeatedly show
that investing ethically does not mean that financial performance has
to be sacrificed.  
§         Advisers identified a lack of
appropriate products as a key limiting factor to the promotion and
take-up of SRI.       

Advisers also feel that some trustees
are uncertain about their role in ‘imposing ethical considerations’.
But as one adviser commented, ‘Trustees need to change their view of
their obligations – they are not in a moral vacuum and they can go
beyond their governing documents.’

Report author Sam Collin
said ‘Many of the challenges raised by advisers could be easily
overcome. The intermediary role of advisers means that they could be
doing more to breakdown the perceived barriers, provide clear and up to
date information to trustees and communicate gaps in unmet demand to
service providers.’

‘Issues such as corporate governance and
climate change are more high profile than ever before in the investment
community. As the significance of ESG issues is increasingly recognised
by mainstream investors the market for advice on responsible investment
is also set to grow. Being at the forefront of new developments could
help advisers take advantage of this growth’ she concluded. 

The report recommends that advisers could do more to:

§         Raise SRI issues with all charities
§         Provide information and training to trustees
§         Include environmental, social and governance (ESG) issues in standard reviews of investment managers
§         Keep informed of the latest developments
§         Communicate market gaps to fund managers

Click here (http://www.charitysri.org/homearea/documents/charityadviserdiscussionpaper.pdf) to download a copy of the research.

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