Failing to invest ethically creates big risks for charities

The UK public expect charities to hold true to their ethical values when making investments, according to new research.

At a time when UK charities face a particularly tough funding environment, What Is The UK Public's Opinion of Charitable Investments? by the EIRIS Foundation and the Holly Hill Charitable Trust, set out to gauge current opinion regarding charitable investments.

The survey found that 78% of the UK public would think worse of a charity if they found out it had invested funds in activities that ran contrary to its specific work and values.

Mark Robertson, head of communications at EIRIS, said: "Our survey provides clear evidence that the British public expect charities to be fully transparent and to think more about the environmental and social impacts that their investments have."

Charities are under increasing pressure to be accountable and transparent in all that they do. In 2011 UK registered charities held nearly £78 billion in investments.

The survey results show that the public are as keen as ever to see charities make investments that match or stand up to their charitable aims. Three out of four respondents (74%) agreed that large charities should adopt ethical investment policies and four out of five (84%) felt charities should be fully transparent about their investments.

Charities that fail to invest ethically therefore run the risk of alienating supporters which, in turn, could result in a reduction in donations. This is something few charities can afford to do, particularly when figures published following last year's comprehensive spending review by the Association of Chief Executives of Voluntary Organisations (Acevo) suggested that charities could face a reduction of up to a £4.5 billion in funding as Government cuts continue to take effect.

The majority of those surveyed (87%) either donated to charities and/or worked for a charity, and of these 89% were not familiar with the investments or investment policies of the charities they worked for/donated to.

The survey coincides with the Charity Commission consultation on investment guidance for trustees, and others who make decisions on behalf of trustees, about a charity's investments. The proposed revised version of Charities and Investment Matters (CC14) explains the legal framework for how ethical investment, mission connected investment and programme related investment can sit alongside standard investment approaches.

Robertson added: "The multiple benefits of ethical investment are well documented. Our survey results, coupled with the Charity Commission's new draft investment guidance, are perhaps the strongest signals yet that charities could be missing a trick by not broadening their investment strategy by linking investment activity directly with charitable aims."

A survey published last year, by the Charity Finance Director's Group and the EIRIS Foundation, found that 60% of charities with investments over £1 million had an ethical investment policy, and 32% of those that that did not currently invest ethically were planning to discuss the issue in the coming year.

Mark Robertson