Case studies

Royal Society for the Protection of Birds (RSPB)

A bird conservation charity that has evolved its SRI policy over many years to ensure it reflects the values of the charity as well as helping to retain the confidence of members and credibility of its policy and advocacy work.

Joseph Rowntree Charitable Trust

A grant-making trust that has invested ethically since 1975, and employs a combination of positive screening, negative screening and engagement.

Save the Children UK

A large children’s charity that, through its investment managers, uses a combination of negative screening, engagement and voting to ensure its investments do not conflict with its objectives.

World Land Trust

A small, environmental fundraising charity that does not want its investments to conflict with its objectives

People’s Dispensary for Sick Animals (PDSA)

A large animal charity that uses negative screens primarily to manage potential risks to its reputation.

 

Royal Society for the Protection of Birds (RSPB)

A bird conservation charity that has evolved its SRI policy over many years to ensure it reflects the values of the charity as well as helping to retain the confidence of members and credibility of its policy and advocacy work.

The charity
The RSPB works to secure a healthy environment for birds and other wildlife. It is the largest wildlife conservation organisation in Europe with over one million members. These members provide a major source of income.

The RSPB has investments of around £10 million as well as a substantial pension fund.

Why the charity invests ethically
The RSPB has had a socially responsible investment (SRI) policy for over 15 years. However, a news story that appeared over a decade ago on the front page of the Sunday Telegraph precipitated a major review. The paper reported that one of the pooled funds in which the RSPB invested had a small shareholding in a company involved in a high profile oil spill – an issue that the charity had been publicly campaigning on.

Finance Director Alan Sharpe commented “As well as conflicting with our principles, we were concerned about the possible damage to our reputation and credibility.”

Developing and reviewing the policy
Alan Sharpe led the review and initiated wide-ranging discussions with trustees over the issues they should consider in their investments. Alan found that it was helpful to frame and direct the trustees’ discussions with:

  • The Charity Commission guidance on ethical investment
  • A list of possible social, environmental and ethical criteria provided by EIRIS
  • Guidance provided by the RSPB’s fund managers on the level of exclusions which could be incorporated into the portfolio without being likely to have significant impact on financial returns

This enabled the discussions to focus on the issues of most relevance to the charity’s mission and on what was realistic and practical. A cross-section of staff was also invited to feed their views and expertise into the discussions.

Agreeing the exact criteria took some time – the initial criteria could have excluded the majority of companies from the FTSE All Share. This caused the trustees to re-think and refine the most important and relevant issues of concern. The resultant policy focused on negative screening, particularly in relation to environmental and animal testing issues.

Implementing the policy
The RSPB used the research services of EIRIS to determine which companies would be excluded by their criteria. The information was passed to their fund manager, who incorporated this into a segregated portfolio.

The RSPB later reviewed this process and decided to switch its investments to SRI pooled funds. The charity felt that this would be less time consuming and easier to implement. It also enabled them to include positive screening approaches to their investments, which they did not feel they had sufficient resources or expertise to do independently.

The RSPB felt that investing in a pooled fund would enable fund managers with relevant expertise to make judgements on which companies to exclude and balance the portfolio in light of this. The charity also felt that performance monitoring would be improved – having previously been concerned that imposing exclusions on a segregated portfolio made monitoring rather cumbersome and introduced an element of subjectivity.

The RSPB used the services of Cambridge Associates to come up with a shortlist of pooled funds that met both their investment and SRI objectives. After discussions with several fund managers, they chose to use funds provided by F&C Asset Management and Henderson Global Investors for the equity element of their portfolios.

The lessons learned
Alan Sharpe feels that the long-term financial performance of investments has not been damaged by its SRI policy. He would advise other charities thinking of investing ethically” be very clear from the beginning about why you are doing it. And use this to structure trustee discussions and focus on what is realistic and practical.”

www.rspb.org.uk

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Joseph Rowntree Charitable Trust

A grant-making trust that has invested ethically since 1975, and employs a combination of positive screening, negative screening and engagement.

The charity
The Joseph Rowntree Charitable Trust (JRCT) is an independent charity which makes grants to individuals and to projects seeking the creation of a peaceful world, political equality and social justice. It was founded by businessman and philanthropist Joseph Rowntree, who established the Rowntree cocoa and confectionary company.

Why the charity invests ethically
JRCT aims to ensure that, as far as possible, its income is earned in ways which are compatible with its Quaker values and grant making policy. Its trustees recognise that their investment decisions, as well as their grant-making decisions, will have an impact on the world.

Developing an ethical investment policy
JRCT adopted an ethical investment policy in 1975 when it first diversified out of Rowntree shares. Prior to this it had taken its position as a share holder seriously, meeting regularly with the Rowntree board to discuss conventional bottom line issues as well as matters such as the Company’s involvement in South Africa.

When the matter was discussed, there was total agreement amongst Trustees that adopting an ethical investment policy was the right thing to do.

Implementing the policy
JRCT uses the research services of EIRIS. Using JRCT’s ethical criteria, EIRIS creates a list of companies detailing whether they are acceptable, questionable or unacceptable. The list is produced quarterly and JRCT’s investment managers use it to screen new selections for the portfolio and review existing companies.

The Trustees also enter into correspondence with companies to gather more information. This may include discussions over the possible disposal of businesses within the company group which conflict with JRCT’s ethical policy. More commonly it is concerned with policies for the conduct of the company’s business e.g. environmental management systems or employment practices.

JRCT currently has around £200 million of investments.

Trustees are satisfied with the returns from the trust’s portfolios and their sense is that having an ethical investment policy does not carry with it a financial cost. Indeed they would subscribe to the theory that a well run company is likely to perform well.

The Trust has outperformed or equaled its benchmark, the FTSE All Share Index, in eight out of the last ten years. In 2006 the return on the whole portfolio gross of investment management fees was 18.0% as compared to 16.8% for the FTSE All Share Index.

The investment policy
JRCT aims to invest in companies:

  • Whose products or services are of benefit to humankind, with minimal harmful impacts and with an emphasis on meeting basic needs rather than luxuries.
  • Whose profits in the long term grow at least in line with the economies in which they operate.

It employs a combination of positive and negative screens covering a range of issues, including armaments, gambling, employment conditions and human rights. Full details of JRCT’s statement of investment principles are available on JRCT's website.

The lessons learned
JRCT’s Finance Director Jackie Turpin feels that the Trust has learned that having an ethical investment policy can contribute significantly to achieving a charity’s aims and does not necessarily have to compromise a charity’s financial returns.

Jackie would advise other charities that administer their own ethical investment policies (rather than investing in ethical funds) to “try to select an investment manager who carries out independent research. The ethical constraints of an ethical investment policy are handled better by a manager who does not rely on information from brokers but is prepared to meet the management of companies and delve into what is driving them. This is particularly important when investing in smaller companies.”

www.jrct.org.uk

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Save the Children UK

A large children’s charity that, through its investment managers, uses a combination of negative screening, engagement and voting to ensure its investments do not conflict with its objectives.

The charity
Save the Children is an international independent children’s charity. It states that “We're outraged that millions of children are still denied proper healthcare, food, education and protection. We're working flat out to get every child their rights.”

Ethical Investment policy
Save the Children UK (SCUK) applies an ethical investment policy to its investments. It states that it will exclude companies from its portfolio whose practices are considered to be in conflict with the United Nations Convention on the Rights of the Child 1989. This means that it will not invest in companies that engage in activities that it judges are in conflict with its objectives.

SCUK also adopts engagement and voting as part of its investment approach. Through its investment managers the charity seeks to use engagement to raise issues of concern with companies. The charity states, “Rather than disinvesting it can sometimes be more appropriate to use investments to open doors to companies and raise social concerns at the highest levels.”

Implementing the policy
SCUK has a segregated investment portfolio of £15million, which is managed by Newton Investment Management. SCUK also invests around £1million in a common investment fund that applies SRI criteria, which is managed by Epworth Investment Management.

SCUK’s statement of investment principles (SIP) includes specific information about how the SRI policy will be applied in practice – for example the activities that the charity wishes to exclude, and the materiality threshold that can be applied. This information is provided to SCUK’s investment managers who apply it to the charity’s investment portfolio.

The SIP is updated annually by SCUK’s Finance Director. The SIP, along with the investment performance report, is then reviewed and agreed by the Board. The exact activities excluded from investments has evolved and changed over time.

Selecting investment managers
When selecting its investment managers, SCUK questioned the SRI expertise and competencies of the organisations it met with, and researched the approach of pooled funds. Finance Director Nick Kavanagh recalls that this was an important element of the selection process. The charity looked for investment managers with a demonstrable commitment to SRI, and included a senior member of SCUK’s policy unit in the decision making process. This reflects SCUK’s intention to link its investments to its policy on working with the corporate sector and its overall objectives.

SCUK’s investment managers quantify the financial impact of the negative screens applied to investments. Nick Kavanagh commented, “Our aim is to demonstrate that good stock selection and sound investment management practice can deliver a good return and achieve social and ethical objectives.”

The lessons learned
Nick believes that there is an increasing number of options for charities wishing to invest ethically, and would advise other charities to research these options carefully and “ask lots of questions of potential investment managers to ensure that their practice matches their rhetoric”.

www.savethechildren.org.uk

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World Land Trust

A small, environmental fundraising charity that does not want its investments to conflict with its objectives

The charity
The World Land Trust is an international conservation charity based in Halesworth, a rural town in Suffolk, UK. Since its foundation in 1989 it has been working to preserve the world's most biologically important and threatened lands, and has helped purchase and protect over 300,000 acres of habitats rich in wildlife, in Belize, Costa Rica, the Philippines, South America and the UK. It is also linked to WLT-US, and has a network of partners owning land overseas.

WLT has an annual income of around £1 million which is raised through donations, legacies and sponsorships.

Practical next steps
WLT first built up reserves in around 2004. At this point Chief Executive John Burton felt that the charity should develop a policy to ensure that reserves were invested in line with its mission. John had experience of the ethical investment industry, having been part of the advisory group for the Trustee Savings Bank’s environmental fund.

John felt strongly that any investments that WLT had should not conflict with the charity’s environmental objectives. “Developing the policy was a very straightforward process. I raised the idea of developing an ethical investment policy with our trustees who all supported the proposal. It is very obvious to me that our environmental concerns should be reflected in our investments.”

The ethical investment policy
WLT’s policy is for any current or future investments to be environmentally friendly.

Implementing the investment policy
WLT has operating reserves of between £250,000 and £500,000 which is invested in a Charities Aid Foundation (CAF) deposit account. WLT is satisfied that CAF’s policy on environmental issues fits with the charity’s policy.

John commented, “We decided to use CAF as it has an environmental policy which fits with our values. It also offers a very good rate of return – better than our local bank.”

John and one of the trustees have considerable knowledge of ethical investment and so they did not seek external advice when discussing the issue.

The lessons learned
John would advise other charities interested in ethical investment to seek advice from an external source and find others who can manage things for them. He adds that investing responsibly is simpler than many people think.

www.worldlandtrust.org

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People’s Dispensary for Sick Animals (PDSA)

A large animal charity that uses negative screens primarily to manage potential risks to its reputation.

The charity
The People’s Dispensary for Sick Animals (PDSA) is a large UK veterinary charity. Its mission is to care for the pets of needy people by providing free veterinary services to their sick and injured animals and promoting responsible pet ownership.

Why it invests ethically
PDSA decided to adopt ethical investment primarily to manage potential risks to its reputation. The policy was developed at a time when the supporters of animal charities were growing increasingly interested in how charities invested their money. PDSA were therefore keen not to alienate supporters and donors. An additional motivation for developing the policy was the growing focus on ethical issues within the wider investment community.

Practical next steps
PDSA developed an ethical investment policy in 2000. The idea was raised with the Investment Committee by the Director General. The Committee was generally receptive to the idea and the Director General then worked with their fund manager (at the time this was Cazenove Capital Management) to develop a policy.

The agreed policy was then presented to PDSA’s Council. Council was initially sceptical of the issue but agreed to the policy for risk management reasons. The process of developing and agreeing the policy took three months.

Since then, ethical investment has gained increasing public attention and Council is therefore now more comfortable with the charity’s ethical investment approach.

The ethical investment policy
The investment policy precludes investments in companies which have an adverse impact on the charity’s underlying beneficiaries. This means that the PDSA does not invest in companies whose activities are contrary to its purpose and it avoids investing in companies which test on animals for cosmetic or other non-medical purposes, and in companies with an involvement in the fur trade.

Implementing the policy
PDSA applies a segregated approach to its £70 million of investments. This is now managed by Newton Investment Management, who apply negative screens in line with PDSA’s policy.

The lessons learned
Finance Director, Martin Clemmey, believes that any ethical investment policy must, first, be tailored to the charity’s objectives and, second, to wider risk management. PDSA’s investment policy was adopted by the Purchasing Manager and is now more widely interpreted by other departments who avoid purchasing from the companies excluded by the investment policy. Martin believes that more could have been done initially to communicate the investment policy internally and develop a consistent approach across the organisation. He also stresses the importance of monitoring and reviewing the policy to ensure that it remains live and relevant.

www.pdsa.org.uk

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