Environmental, social and governance (ESG) principles form a charity’s responsible investment policy.
Evelyn Partners works with charities to understand their ESG objectives first, and then build a portfolio around these. From an investment perspective, while some charities are income or growth driven, most want to preserve their capital for future stakeholders. We rely on the strength of our central investment process to create truly bespoke portfolios which are aligned to each charity’s risk and financial objectives. ESG considerations form a core part of our central process, with each of our internal sector specialists incorporating ESG screening as part of their fundamental company analysis.
Recently we worked with an education charity to create a portfolio that supports and promotes gender equality. Our client wanted a pragmatic approach to the promotion of women in the workplace and strong evidence of workplace diversity programmes across all products, services, and operations in the companies in which they invested. As they want to promote a strong “direction-of-travel” approach, they rely on Evelyn Partners’ company engagement to include those companies that have not yet achieved full alignment with the goals of the portfolio but are moving in the right direction.
In volatile markets, do charities need to forgo ESG investing?
Not at all! In fact, when markets are especially volatile, charities that invest in line with an ESG investment policy are often less susceptible to market downturns. The additional due diligence of screening investments against ESG criteria often unearths concerns that affect the overall investment case, thereby weeding out potentially weaker holdings at an earlier stage and creating a higher quality portfolio. While a general market slowdown can affect any portfolio, quality holdings have proven more resilient against downside risks.
Why is that? While most investors associate ESG mostly with the E, many forget that companies that are strong in their S and G criteria may, in times of market turmoil, provide safe havens for investors. These companies are historically associated with more diversification in their workforce and are more likely to have a culture that promotes innovation; vital when economic volatility can quickly wipe out traditional business lines as we witnessed during the Covid-19 pandemic.
How should a charity approach ESG for the first time?
Charities must first decide if they want their ESG lens to be narrow or broad and create a policy defining their objectives. This is most often done in consideration of a charity’s mission. While some charities focus on the E, S or G specifically, others prefer a “best practice” approach. For example, while climate change is a pervasive concern across sectors, charities approach climate change mitigation from different perspectives. Some take a zero-tolerance policy to high carbon emitting industries and others take a more Just Transition approach to promoting companies which are moving towards a renewable future. Regardless of approach, benchmarking against suitable parameters such as the UN Sustainable Development Goals, Paris Agreement standards or carbon footprint reporting provides charities with a useful foundation to measure their impact.
Evelyn Partners can help you to navigate the finer points of an ESG policy and to understand how your choices affect your overall goals. Please feel free to get in touch with me at Keith.Burdon@evelyn.com
Keith Burdon is Director, Investment Management at Evelyn Partners
Important Information
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. The value of investments can go down as well as up and investors may not get back the amount invested. Past performance is not a guide to future performance.
Issued by Evelyn Partners Investment Management Services Limited, authorised and regulated by the Financial Conduct Authority
