Shifting priorities
This year’s survey suggests that 2022 is a year of change for the charity sector. Many charities continue to feel the longer-term impacts of the pandemic, while widespread concern over inflation, a cost-of-living crisis and geopolitical uncertainty have provided a challenging backdrop for investment strategy and performance.
Nevertheless, some trends remain unchanged – responsible investing and ethical considerations continue to be important topics for charities as they come under increasing pressure from stakeholders.
The Newton Charity Investment Survey has now delivered nine years of unique industry insight and trend comparisons. It covers diverse aspects of the management of charitable portfolios, and provides an industry benchmark to see how aligned charities’ investment experience and intentions are with those of their peers. Key findings from this year’s survey include:
Concerns, old and new
In 2022, inflation is now the main concern for charities, and by a significant margin. Over 75% of charities state that inflation is very concerning, and a staggering 99% of charities are at least somewhat concerned about the subject. Rising costs, less generous donations and increasing demand from beneficiaries could present a major challenge for charities.
While the worst experiences of the Covid-19 pandemic may be behind us, 2022 has seen its impacts on charitable activities increase. 53% of charities report that management and administration have been affected, while the impacts on fundraising, reviews on charitable activities, and updated contingency planning have been felt by around 40%-50% of all charities surveyed.
Charitable investment in a complex world
In 2021, we started to see some of the initial signs of recovery in investment returns, but these have been overturned by the events of this year. 12% of charities have seen their portfolio lose value over the period – a 10% increase compared to last year. Lower rates of return of 0% to 3% have also seen an increase, while the percentage of charities seeing a rise of more than 15% has declined from 30% in 2021 to just 3% this year.
Charities remain more positive over the medium and long term, with higher return expectations for the future. Over 80% of charities expect an average return of above 3% over the next 3-5 years, while 36% expect returns of 6-9% per annum over the next 10 years, and the number expecting returns higher than this has also grown.
ESG and sustainable investment
Charities continue to acknowledge the importance of environmental, social and governance (ESG) investment factors in the management of their portfolios, as they come under increasing pressure from trustees. In 2022, 87% of charities feel that ESG factors are either very or quite important in the management of their portfolio. Engagement is once again the most popular way of considering ESG factors – chosen by 59% of charities, compared to only 27% that prefer divestment.
Fossil fuels remain a key area of contention within sustainable investment, and 2022 marks a significant change in how charities are approaching the topic. The proportion of charities excluding the area has remained relatively stable at 29% after last year’s increase – but the number debating the issue and considering future action has risen to a third of charities.
More about the survey
This year’s survey included 91 charities, with a combined £7.3bn in assets under management. Fieldwork took place between 3 May and 5 July 2022, with 31 March 2022 representing the record date for annual investment performance data.
View the full 2022 Newton Charity Investment Survey.
Rorie Evans, head of charity clients, Newton Investment Management
Important information
These opinions should not be construed as investment or any other advice and are subject to change. This document is for information purposes only. Any reference to a specific security, country or sector should not be construed as a recommendation to buy or sell investments in those securities, countries or sectors.
Issued in the UK by Newton Investment Management Limited, The Bank of New York Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England No. 01371973. Newton Investment Management Limited is authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN and is a subsidiary of The Bank of New York Mellon Corporation. ‘Newton’ and/or ‘Newton Investment Management’ is a corporate brand which refers to the following group of affiliated companies: Newton Investment Management Limited (NIM) and Newton Investment Management North America LLC (NIMNA). NIMNA was established in 2021 and is comprised of the equity and multi-asset teams from an affiliate, Mellon Investments Corporation.
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