(5 minute read)
Published: 2 September 2024
Written by: Alice Thornton, Head of Research and Impact
In May this year we published an updated version of our Investment Policy. This publicly available Policy outlines the agreed principles and practices underlying the investment of our circa £150m endowment, which is how we generate money to fund our grantmaking. Our Policy also sets out clearly our ambitions and intentions to make money in ways that are ethical and environmentally responsible.
Every year, we work with our Finance and Investment Committee to review and update the Investment Policy. We do this for a number of reasons, including to ensure alignment with our charitable mission and investment needs. We also update it annually to reflect the fact that our thinking on responsible and social investing is constantly evolving and progressing, and we want our Investment Policy to be an accurate and up-to-date reflection of the kind of investor we want to be.
This year’s update is a particularly exciting one for us, and one we are proud to share. Since first publishing our Investment Policy in 2020, we have become much clearer year on year about how we can play our part in responding to the climate and nature crises by investing responsibly and with purpose. We feel that the changes we have made this year provide a clear and nuanced guide, and represent significant progress in our approach.
The main changes relate to our approach to exclusions. We have also made further updates to the sections on responsible investing and social investing.
Our policy on exclusions
The changes we have made include excluding any investment in the following:
- Indirect investments into tobacco (we have excluded direct investments in tobacco companies for some time, but we will now exclude investments held indirectly as well, for example holdings in pooled funds).
- Thermal coal (a type of coal that is burned to generate electricity).
- Tar sands (a type of sand or sediment containing bitumen, which can be processed into crude oil).
- New primary market capital for fossil fuel production and infrastructure (this means, for example, we will not buy new shares issued by oil and gas companies).
We have chosen to make these exclusions because we believe these activities can never be compatible with our mission. In other words, no amount of engagement with companies who derive income from tobacco, thermal coal or tar sands will help to advance wellbeing for people, society and the natural world; and providing new investment to fossil fuel production and infrastructure is fundamentally misaligned with the aims of the Paris Agreement, which seeks to keep temperature rises well below 2°C above pre-industrial levels.
In other cases, we will focus on using our voice and influence to drive improvements in investee companies’ behaviour where these do not align well with our mission.
Our commitment to responsible investment
Other changes to our Investment Policy include:
- Emphasising our belief in stewardship to produce sustainable financial, environmental and societal benefits. This means using our influence to ensure that our investments generate not just a positive financial return, but social and environmental benefits as well.
- Re-emphasising our ongoing commitment to address the systemic impact of the climate and nature crises. We believe that as an investor, we have a duty to consider how the income that funds our grantmaking is generated and the implications of those activities for the natural world.
There are a range of tools that we use to achieve these aims. They include encouraging the managers who invest our funds to engage with investee companies and promote environmentally and socially responsible practices; asking them to vote at shareholder meetings in support of resolutions with positive social and environmental aims; and influencing policy makers to strengthen regulation. We also prioritise collaborative approaches, which means working with other like-minded investors including through the Charities Responsible Investment Network.
Our Investment Policy previously focused on the use of shareholder voting rights to influence changes in investee companies’ behaviour. Using the language of stewardship reflects our improved understanding of the role that fund managers can play by actively taking social and environmental as well as financial risks into account as part of the investment process.
Our commitment to social investing
Social investing means making an investment that will directly achieve our mission, as well as generating a financial return. Since 2020, we have developed our thinking on social investment so that we now take account of non-financial outcomes alongside financial returns. We have also become active members of different networks and groups where we can learn more about social investing and potential social investment opportunities. This year, our updated Investment Policy commits us to determine and agree the approach we will take to making social investments within the next 12 months.
What happens next?
Our endowment is currently invested with six fund managers, who we actively engage with throughout the year to ensure alignment with our mission and values. We are currently in conversation with all our fund managers to ensure alignment with this latest version of our Investment Policy.
As part of our commitment to transparency, accountability and effectiveness, we publish our Investment Policy on our website and you can read it in full here.