The importance of being conscious of how charity money is invested. Do you know where your dollar goes?
“It will be forever known as the Bannatyne Moment. In December 2013 the BBC’s Panorama looked at investments in the charity sector. Comic Relief was among a small number of big charities which invested its reserves in funds linked to alcohol, arms and tobacco. One of the most memorable scenes saw Dragons’ Den’s Duncan Bannatynedoorstepped by the makers of the programme. Bannatyne, a trustee of Comic Relief at the time, was first bewildered and then brusque as he suggested that he had no idea that these investments were being made and would have disapproved if he had known.
Since then, Comic Relief has held its own internal investigation and decided on a new ethical investment policy. It should be robust, led as it was by charity investment stalwart John Kingston. And this is good for Comic Relief. But what about the rest of the UK’s charities and social enterprises? Are they confident that they know how their organisations invest their reserves, their deposits or their pension funds? Are they insured against a Bannatyne Moment of their own? Are many charities investing in alcohol, arms or tobacco?
On this issue, charities are caught in a dilemma between good trusteeship and the demands of sound finance. On the one hand, trustees must try to make the most of donations given in good faith by the public. Accepting significantly lower returns would be bad for the causes they support through their work. On the other hand it’s clear that, in an age of global capitalism, investments in good causes – or at least not in bad ones – are a key part of a charitable mission. There’s a risk that charities might directly harm their beneficiaries by their decisions on where to invest.
The Charity Commission has published a guidance document – CC14 as they call it – to try to help. And it does state clearly that ethical investment can be part of the charity mix. Yet it isn’t clear how far it can stand in the way of financial return. There are still several problems that bedevil the area.
First, investment decisions are often taken at the operational level. They are complex and require specialist knowledge. Charity chief executives often delegate them to their finance officers, or their finance and audit committees. And this is perfectly good practice – until it causes a Bannatyne Moment. If the finance officer does their job well and protects the bottom line, rather than doing the job of a chief executive, and if they look at the matter in the whole, the money may not end up where the charity’s mission would demand.
Second, there is the problem of complexity. The ethical and responsible investment marketplace is large, complex and growing. There is $12tn under global management worldwide in ‘ethical’ stocks, and $34tn subscribing to the UN Principle of Responsible Investment (UNPRI). Many of these investments may or may not be aligned with the missions of a particular charity. One woman’s investment in farming in the developing world, is, after all, another woman’s investments in Outspan oranges in Apartheid-era South Africa. Furthermore, we might say that a charity dedicated to improving the lot of dogs and cats shouldn’t invest in vivisection, but should they also be proscribing themselves from investing in tobacco?
Ultimately, this is about the public’s trust. Charities and social enterprises are ethos-driven, mission-driven groups who come together to make a difference. They are valued, trusted institutions – according to Ipsos MORI polling guru, Ben Page – and must treat that trust with care.
As long as there is still disagreement and confusion about investment powers and duties, there will be a danger of charities losing public trust. In Cambridge this month, students and residents launched a joint “town and gown” effort to protest against the University’s investment policies. The Charity Chief Executives’ body, ACEVO, has recently set up a commission to help all charities and social enterprises devise and apply a responsible investment strategy. We want to ensure charities get proper guidance and don’t find themselves in a similar position – or worse yet, facing aBannatyne Moment of their own.
The question of charity investments and how they are decided and communicated might sound procedural, but it is growing in the public consciousness and it will not go away.”