EIRIS Services for charities
This page introduces
charity trustees and their fund managers to the services and research EIRIS
provides and describes how you can encourage your charity to introduce a
socially responsible investment policy.
Charities and
churches invest significant sums of money. And much of this is invested
according to ethical criteria. Research shows that ethical or socially
responsible investment can be consistent with good financial performance.
Research by EIRIS and
others indicates that investing according to ethical criteria may make little
difference to overall financial performance, depending on the ethical policy applied.
Five ethical indexes created by EIRIS produced financial returns roughly
equivalent to the returns from the FTSE All-Share Index. For example, the total
return of the Charities' Avoidance Index, which excludes the vast majority of
companies involved in tobacco, gambling, alcohol, military sales and
pornography, was 0.38 per cent greater than the All-Share. For more information
on the relationship between ethical and financial performance see the EIRIS
publication,
Does Ethical Investment Pay?
Many benefactors care about how their money is invested and if they disapprove of an investment, there is a risk that they may withdraw their support. A cancer charity may attract criticism if its funds were used to invest in a tobacco firm, for example.
On
Under the Trustee
Investments Act 1961, trustees were compelled to divide charity assets between
narrower and wider range authorised investments. The narrower range was often
fixed interest securities and the wider range investments were shares. Strict
rules applied to the division of funds between ranges. The new Act replaces
this complex system with a "general power of investment" that can be
used in relation to any charity property held on trust.
When exercising the
general investment powers, the new Act requires trustees to:
·
adopt a statutory duty of care
·
take proper advice
·
have regard to the "standard
investment criteria"
This "standard
investment criteria" is outlined in Section 4(1) of the Trustee Act 2000.
It states that trustees must have regard to the suitability to the charity of
the investment proposed and recognise the need for the diversification of the
charity's investments. This applies to both the exercise of the power of
investment as well as when reviewing investments.
It is this question
of "suitability" that may have the greatest influence over the
ethical considerations of your charity's investments. The Charity Commission's
initial guidance on the Act's key effects explains: "Suitability relates
both to the kind of investment proposal to be made or being reviewed and to the
particular investment as an investment of that type. It will include
considerations as to the size and risk of the investment and, in the case of
endowed charities, the need to be even-handed between the interests of present
and future beneficiaries of the charity. It will also include any relevant
ethical considerations as to the kind of investments that are appropriate for
the trust to make".
Full guidance on effect of the Trustee Act 2000 can be found on the Charity Commission's website www.charity-commission.gov.uk
It is also published in the revised version of
their guidance booklet CC14 - Investment of Charitable Funds: Basic Principles.
Establish a list of
any activities, (arms sales, tobacco production, for example) that conflict
with your charity's objectives. Check that none of your donations, support and
work are being damaged by current investments. And check your Trust Deed - does
it say anything about socially responsible investment? Existing deeds can be
changed; contact the Charity Commission and seek legal advice about doing this.
2. Consider the best ways to build an ethical policy for
your charity
You don't have to
start with an all-or-nothing policy. It might be appropriate for your
organisation to start with a limited but well-defined list of objectives from
which a policy could be built. Look at the policies drawn up by similar
organisations and establish what would be best for yours.
3. Canvass the views of donors, beneficiaries, staff and
other stakeholders
Your supporters and
beneficiaries are stakeholders. Their views should be taken into account. Any
socially responsible investment strategy will have to be written down and
approved. If you decide to go ahead, think carefully about whether you have the
time and resources to see it through. You may need a management mechanism, like
a sub-committee, to regularly review the ethical aspects of your investments.
4. Seek expert advice on finance, law and management
·
Finance. Your existing fund manager may
have experience of socially responsible investment. If not it may be worthwhile
finding one that would be willing to help you put your policy into effect.
·
Law. There are several statutory duties
that a charity trustee must adhere to when investing charitable funds. The
Charity Commission outlines your legal requirements in their pamphlet, CC14 -
Investment of Charitable Funds: Basic Principles. In addition to this it is
important to seek legal advice.
·
Management. Your organisation may
benefit from help in thinking through the foundation and scope of your policy
and the best way to practically implement and maintain it.
5. If you have an existing policy, is it being properly
monitored?
It is all very well establishing a socially responsible investment policy, but it will be rendered useless if information is not kept up-to-date. And there should be a way of getting information about the actual performance of companies, other than relying solely on those companies. Other sources could include official databases, campaign groups, and independent research bodies like EIRIS.
Direct shareholder action can be a powerful tool for anyone who wishes to influence the ethical behaviour of a company. Institutional shareholders such as charities, church bodies and pension funds still have all of the rights of direct shareholding. The institution simply appoints a representative to attend the AGM and that person may vote and speak at the meeting in the same way as an individual investor. A number of charities now target certain companies which they invest in to encourage them to improve their policies or practices.
The rights and powers
of shareholders are discussed more fully under
Share
ownership.
How EIRIS can help charity trustees (and their
fund managers)
The Rt. Reverend
Richard Harries, The Bishop of
"EIRIS has pioneered objective assessment of ethical investment and it offers an invaluable service to all, whether corporations or individuals, who wish to take ethical considerations into account when investing, as well as financial ones".
Charities are turning
to ethical investment to avoid conflict with their objectives and to deliver a
positive message to both staff and the public. When your organisation adopts an
ethical investment policy, you may be able to further the aims of your charity
by putting pressure on the companies in which you invest.
EIRIS is one of the largest and most experienced ethical
investment research organisations in the
We can help you:
·
examine your current portfolio and
identify ways in which it can be improved to reflect more closely the aims of
your charity
·
implement an ethical investment policy
based on negative criteria, or on a combination of positive and negative
criteria
·
monitor the social and environmental
performance of the portfolio over time
·
gain more detailed information on
individual companies by providing EIRIS company reports
·
liaise with companies on social and
environmental issues of concern to your charity
·
give clear instructions to your fund
manager - on which companies should be avoided, for example
·
screen corporate donors to check their
activities do not conflict with your charity's aims
·
establish which issues are of greatest
concern to your donors
·
determine when and how to update the
ethical investment policy of the fund
·
communicate the policy of your charity
or church effectively
Alan Sharpe, Director
of Finance and IT, The Royal Society for the Protection of Birds
"Every company in every industry leaves its mark on the environment. EIRIS is helping the RSPB to work with those who are striving to keep that mark to a minimum".
The Joseph Rowntree
Charitable Trust (JRCT) has operated an ethical investment policy for many
years and this policy set out on the finance page of the Trust’s website.
The Trust’s
Investment Committee meets three times a year. Two meetings, one held in
April/May and one in October/November cover detailed consideration of the
individual companies in the portfolio and meetings with fund managers. The
other meeting is used to make visits to companies or explore aspects of the
Committee’s business in greater depth. The Trust’s Finance Secretary works
closely with EIRIS to ensure that ethical aspects only take up a third of the
all-day meetings. EIRIS provides a screening service and this is complemented
with dialogue by companies and information gathered from the fund managers.
Each year the Trust
reviews the selection of EIRIS criteria to fit their ethical policy. Using the
Trust’s ethical criteria, EIRIS creates a list of companies detailing whether
they are acceptable, questionable or unacceptable. The list is produced
quarterly and the Trust’s investment managers use it to screen new selections
for the portfolio and review existing companies.
The Trust will often
write to companies asking for more information on a particular practice. By
instituting such dialogue with companies the Trust has found that some
companies go to great lengths to address the issues. It believes that it is
better to have a situation whereby companies are given the opportunity to
respond to any problems, rather than an automatic system of selling any stock
that appears to engage in an offending activity after purchase.
Any new information
on companies, which relates to the JRCT policy is highlighted by EIRIS and
discussed by the Committee at their regular meetings.
Contact details:
Finance Secretary
The Joseph Rowntree
Charitable Trust, The Garden House, Water End,
Tel: 01904 627
810 Website address: www.jrct.org.uk
The Charity
Commission is the UK Government department responsible to the Courts and to the
Home Secretary. It maintains a register of all charities in
The CEIG is an
independent voluntary body formed in 1988 to promote ethical investment within Christian
organisations in
The Church of England
publishes their Ethical Investment Advisory Group's statement of ethical
investment policy on their website www.church-of-england.org/view/index.html
Ecumenical Council for Corporate Responsibility (ECCR)
The Ecumenical
Council for Corporate Responsibility (ECCR) was founded in 1989 to raise the
profile of corporate responsibility within churches. ECCR is an ecumenical
organisation and it includes within its membership representatives of many
Christian denominations. ECCR may have actions or campaigns around particular
companies and encourages networking amongst shareholder members. www.eccr.org.uk
Interfaith Center on Corporate Responsibility (ICCR)
ICCR is a