Investment options

Responsible Investment can take many forms and the options for where and how to invest responsibly are growing. In the past the focus of Responsible Investment has been on shares, but charities can now invest in a number of ways that also incorporate social, environmental and ethical (SEE) issues.

This page will help you understand the investment options that may be available to the charity you support.

Segregated mandates and pooled funds

The options available to charities will depend upon how much they have to invest, as well as their investment strategy and SEE criteria.

Investing in a fund allows a charity to pool its money with that of other investors. Such funds can then be invested in line with the strategy and criteria (financial and SEE).

Options include:

  • common investment funds (funds specifically set up for charities)
  • unit trusts
  • OEICs (Open-Ended Investment Companies)
  • nvestment trusts

A segregated mandate means that a fund manager will invest a charity's money according to its specific requirements. This approach usually requires larger investment sums.

Segregated mandates and pooled funds can allow charities to invest in different types of assets - such as equity, property or cash.

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Asset classes

Equity investment refers to the ownership of a share in a company.

Bonds are debt instruments created to raise capital. They are loans to organisations. Bonds usually have a fixed rate of interest paid regularly and aim to pay back the capital at the end of the period covered by the bond.

An index is a means of measuring the performance of a financial market or a sector of a particular market through the combined prices of some or all of its constituents. Some indices only include companies which meet specific social, environmental or other ethical criteria. Tracker funds are passively managed funds which track the performance of particular indices.

Property investments can provide opportunities for charities to take environmental, social and community issues into account.

Private equity refers to investing in management buy-outs of unlisted companies

Venture capital refers to investments used to fund a new business venture (or 'start-up') in early stage expansion. There are opportunities to invest in environmental and regeneration funds.

Hedge funds offer an alternative approach to investments. Hedge funds and funds of hedge funds are emerging which include Responsible Investment criteria.

These asset classes can incorporate SEE issues in a variety of ways. More information can be found in Responsible Investment Approaches to Non-Equity Investments.

Other responsible approaches

Many charities may not have sufficient sums to invest. But charities of all sizes can take a responsible approach to their banking and pensions. Charities can also apply ethical criteria to the companies they work with - as partners, donors or suppliers.

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