Step 5: Report and review
The fifth step is about helping a charity to:
- report on investments to stakeholders
- review the investment policy
- evaluate and monitor the performance of investments (financial and other)
It is important for a charity to be transparent about its policy and ensure that its social, environmental, ethical and financial objectives are being met. Charities should also be aware that reporting on investment policy is part of SORP reporting requirements.
Report on the policy and its impact
The revised reporting standards for charities, SORP 2005 require that trustees report on ‘the extent (if any) to which social, environmental or ethical considerations are taken into account’ within the investment policy.
Charities may need guidance on the inclusion of such a statement in their annual report.
You may suggest that a charity communicates more details of the policy and its impact to particular stakeholder groups – such as staff, funders or beneficiaries.
Reporting on the policy and its impact presents an opportunity for charities. It can enable the charity to:
- share its reasons for adopting Responsible Investment
- bolster its image
- build links with stakeholders, particularly if they were consulted as part of the process, or have raised concerns in the past about investments
Review fund manager and investment performance
Fund managers should provide charities with appropriate information about the implementation of the policy and fund performance. This could include:
- how social, environmental and ethical (SEE) matters have been incorporated into its investment processes
- voting record on SEE issues
- details of SEE research and engagement capabilities
- how emerging SEE issues are identified
- which companies the fund manager has engaged with, on which SEE issues, and with what outcomes
Advisers may be able to help charities establish an effective and on-going monitoring process. This should be based upon criteria for assessing and reviewing the policy, its implementation and impact, agreed with fund managers.
This could include an assessment of factors such as:
- the performance of fund managers
- whether the key issues were addressed
- whether the aims of the Responsible Investment policy have been met
- whether the “right” Companies were screened in or out of the portfolio
- the effectiveness of engagement if done
- any feedback received from staff or other stakeholders
Further information
The Just Pensions programme has produced a series of resources for trustees. These are specifically designed for pension fund trustees but are also relevant for charity trustees. These include:
A list of questions to help assess how fund managers incorporate social, ethical and environmental risks into their stock selection, and / or their engagement with companies.
Download list
A Responsible Investment Trustee Toolkit, which contains a list of questions for trustees to ask their fund manager and investment consultant about engagement based Responsible Investment.
Download toolkit
The Eurosif Retail Transparency Guidelines aim to create more clarity on the SRI principles and processes of fund managers. The website gives details of which fund managers are signatories to the guidelines and their approach to SRI.
Accounting and Reporting by Charities: Statement of Recommended Practice (revised 2005)
