How can Evelyn Partners help charities to align their portfolios with their ESG principles?
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. Currently, we manage over £3bn in assets under management for 1,200 charities. 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.
We help each charity in an individual and bespoke way. 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.
Which ESG themes are most important to charities right now?
In a word, all. Individual charities’ ESG requirements are wide ranging, and we are happy to work with all of them. These have included promoting renewable energy transition and circular economy policies, supporting under-represented demographics or protecting the environment. Since the 2022 Butler-Sloss ruling, those charities which wanted to promote more environmental protection but previously felt it wasn’t fully aligned to their mission, are now choosing to do so. Increasingly, charities are looking at specific ESG areas such as wildlife protection, water conservation and green energy. Evelyn Partners works with charities which have specific and finely tuned policies and those that want a broader “best efforts/best practices” approach to responsible investment.
Recently, we have been working with military charities which are keen to enhance their ESG investing criteria. Some have not employed such criteria in the past, which is out of sync with Charities Commission guidance and the Ministry of Defence; others have adopted nonbespoke criteria which has inadvertently screened out entire sectors that their beneficiaries would probably want to see represented in their portfolios.
How can 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 “ Charities that invest in line with an ESG investment policy are often less susceptible to market downturns ” reporting provides charities with a useful foundation to measure their impact.
Evelyn Partners helps charities to navigate the finer points of an ESG policy and to understand how their choices affect their overall goals.
For more information, please contact Caroline Jarvis Gee, Head of Charity Business Development England & Wales ([email protected])
Nick Murphy is head of charities and Caroline Jarvis Gee is head of charity business development England & Wales at Evelyn Partners
What we do
Evelyn Partners is the charity investment manager who believes in providing charities with a truly bespoke investment portfolio. We have a robust central investment process which provides the foundation and structure to manage risk at every level and provides our clients with the peace of mind that their portfolios are capturing long term trends, while managing short and medium term risks.
We were born of the merger between Smith & Williamson and Tilney Bestinvest with a history that dates back to 1836. Today we manage £53 billion in assets under management including £3bn for 1200 charities (as at 31 December 2022). Our principles for managing charity money are simple: utilise a strong foundation made up of robust investment and risk management processes to provide charities with a bespoke investment portfolio that meets their individual and unique investment and ESG needs and peace of mind. For more information please go to www.evelyn.com/charities
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