Charity Finance Survey: Optimising investment outcomes

Charities need to maximise resources for greater impact. Our blog highlights key takeaways from the Charity Finance Survey.

We are pleased to have once again taken part in the annual Charity Finance Investment Consultants Survey from Civil Society.  

In this blog, we highlight the key takeaways from our response to the survey, focussed on helping improve outcomes for charities to: 

• Gain a better understanding of how the performance of your managers stack up 
• Lower your investment manager fee so that you’re able to ‘do more good’ for your mission 
• Achieve direct alignment between your charitable purpose and investments 
• Meet Charity Commission expectations and ensure good governance of your investments 

How do we see the market evolving? 

In our response, we noted how an increased number of charities are seeing the benefits of independent professional advice off the back of recent Charity Commission guidance (more on that here).   

Investing charity money: guidance for trustees (CC14) clarifies the difference between an adviser and an investment manager, noting that trustees ‘must take professional advice’ before making and reviewing investments. We fully expect that an increase in independent advice will lead to improved information and options for trustees, with many not being aware that they are currently experiencing underperformance and/or expensive investment fees.  

With our independent view, we shine a light on how your investment strategy is performing, allowing you to make purposeful, informed decisions. We also help answer the question of whether you are getting value for money for the significant fees you may be paying your investment managers.  

Where this isn’t the case, our involvement can lead to a downward pressure on fees through increased bargaining power, with the cost of advice a fraction of that of the investment management fees for most of our clients. We believe this offers great value for charities, enabling them to get the most out of their investment arrangements to make the biggest positive impact on society.   

What topics have we been advising our charity and endowment clients on? 

Our response noted how we have been highlighting ‘Megatrends’ – long-term themes expected to drive the trajectory of the global economy over the next few decades - to both existing and new clients. We believe true long-term investors, like charities and endowments, can benefit from exposure to these trends in a way that investors with a short-term focus may miss.   

We’ve highlighted four key trends – natural capital, the green transition, labour dynamics and artificial intelligence (AI) – with long-term investment opportunities in a variety of asset classes.  

As an example, for natural capital there are specialist alternative investment funds providing access to forestry and agricultural land. Often, investments targeting these megatrends also equate to making a positive impact (e.g. enabling a just transition away from carbon) and can better align with your charitable purpose without forgoing expected returns. Find out more about Megatrends here, with further detail on AI and robotics here. 

In addition, we have clarified for many charities whether their investments are performing well relative to their objectives (both financial and sustainability). One way we have done this is through consolidated reporting across a number of investment managers to consider how their overall strategy has performed and proactively identified opportunities and risks. This provides trustees with peace of mind and allows them to make better, more informed decisions, whilst also reducing the ever-increasing governance burden.

Our thoughts on greenwashing and how our research can help 

The survey points to how the rise of Environmental, Social and Governance (ESG) investing has been accompanied by greenwashing, whereby investment manager marketing deceptively exaggerates green credentials to convince investors that products, goals, or policies are environmentally friendly.  

In our response, we highlight that whilst new anti-greenwashing rules are a step in the right direction to help give investors the clarity they are seeking, they are not a substitute for doing proper fund due diligence. For example, Sustainability Disclosure Requirements (SDR) labels are not mandatory, so investors may miss out on potentially suitable sustainable funds, which have chosen not to adopt a label. Equally, it is important to be able to truly assess the impact of your investments, be that in relation to environmental, social or governance factors.  

We carry out a large amount of tailored research each year into investment managers that can offer investment solutions to our clients’ needs. This includes private markets and impact-focussed and mission-aligned investments, as well as managers considered traditional ‘charity’ managers (but we don’t believe that a charity needs to consider them exclusively). Our nimble and fully independent approach allows you to select managers that are best for you.     

Need support? 

There are a number of ways that we can help your charity achieve its objectives. 

We are delighted to have once again contributed to the Charity Finance Investment Consultants Survey, and this blog provides a brief insight into our survey responses, as well as current discussions we are having with charity clients.  

Please do get in touch for a discussion on how we can help your charity.