UK Charities express doubt over managers’ ability to implement ESG exclusions
Charities have raised concerns about managers’ ability to apply environmental, social and governance (ESG) exclusions when selecting investments, according to a survey showing that the sector remains strongly committed to climate-conscious and sustainable investing.
Almost half of charity executives said that their list of investment exclusions had increased over the past two years, with environmental degradation as the top exclusion, according to a recent survey conducted by Rathbones Group
The survey conducted among 100 UK charity board directors, finance directors, investment managers and investment directors with a collective £3.7bn of equity investments, showed that almost all charity executives were concerned about the ability of their investment management advisers to consistently meet their charities’ ethical requirements.
Only 6% of charities said that they were “very effective” at screening out potential investments that do not meet their ESG exclusion policy while roughly three-quarters said that they were “quite effective” at discarding potential investments that do not align with their exclusion policy.
Despite concerns about the ability of investment management advisers to consistently meet their ethical requirements, the survey showed that ESG investment will become more important for charities over the next five years. This shift is seen in Joseph Rowntree Foundation’s recent decision to move solely to mission-related investing, as well as continuing its grant-making.
The CEO of the £400m UK-based charity, Paul Kissack, announced earlier this year that all of the foundation’s endowment will be used to tackle poverty, as previously only a small percentage of it served that purpose. It is one of the few foundations to take this stance. Others include the California Endowment.
Andy Pitt, head of charities at Rathbones, said: “Charities are telling us they want partners who can provide tailored, values-driven investment solutions that go beyond simple exclusions, and offer proactive strategies that support long-term, sustainable impact.”
The increasing momentum towards ESG places pressure on investment management advisers working with charities, the survey found.
The $200m US-based Sierra Club Foundation announced its decision to divest from BlackRock in June of this year, in order to “safeguard its assets”.
The foundation cited the asset manager’s failure to address “the systemic financial implications of the climate crisis” through its investment decisions as its reason.
The foundation previously had $10.5m in BlackRock funds and made the decision to transfer its assets to women-led impact investment firm Nia Impact Capital and a Black-founded and majority owned multi-strategy investment firm Xponance.
