Fewer than a third of UK charities have debated the fossil-fuel issue, with only 4% adopting some form of fossil-fuel exclusion in their investment portfolios, according to the second annual Newton Charity Investment Survey.
Newton Investment Management, part of BNY Mellon Investment Management, surveyed 94 UK charities with combined investment assets of almost £21 billion, and sought their views on asset class returns, ethical considerations and board composition.
When asked about their biggest concerns for investment portfolios in the future, ‘caution’, ‘income’, and ‘volatility’ were among the most prevalent themes. In the next 3-5 years, charities are generally more cautious about the returns they expect from their investment portfolios with only 8% expecting returns over 9% per annum. However, over a 10-year time horizon, charities are more optimistic with 15% expecting total returns over 9% per annum.
Insight into gender diversity of trustee boards revealed that women are better represented in this sector than on the boards of the average UK plc. According to the survey, the average charity has 9.6 male trustees and 4.4 female trustees, with women making up 30% of all trustees on charity boards. Of those surveyed, 12% have no women on their board.
Jeremy Wells, Senior Client Director of Charities and Institutions, Newton Investment Management, commented: “Given significant campaigns in the national media, particularly on fossil fuel-free investing, we were surprised that so few charities had debated or adopted policies in this area. However, this is a fast moving issue which can have a significant impact on investments, and it may be a case of taking time to implement the changes.”
“In a year which has seen the FTSE 100 reach its all-time high, and then a global market fall around China’s Black Monday, many charities are taking a more cautious view on the outlook for the next three to five years, compared to 10 years. This may be attributed to UK charities believing the current difficulties in the global economy and global markets will have resolved themselves entirely within a decade from now.”
Other key findings:
– Active management strategies remain the desired investment approach for a large proportion (66%) of charities.
– Charities reported slightly higher return experiences in 2015 with 21% of respondents reporting a total return in the 12%-15% range, compared to just 7% in 2014. The average in 2015 was 9.4%.
– A majority of charities (70%) have some exposure to alternative assets within their portfolio, with educational charities the most likely (94%) and heritage charities the least likely (33%).
– In response to recent changes in regulation from the Charity Commission, 9% more charities than in 2014 are setting fund managers an annual total return target, with almost 90% feeling confident that these figures with be sufficient to meet obligations.
– The vast majority of charities (84%) use only external fund managers to manage their investment portfolios, with just one charity managing its investment portfolio entirely in-house.
This independent survey was conducted across leaders and decision-makers in the charity sector between May and June 2015. Representatives of 94 large UK charities, with combined investment assets of almost £21 billion, participated. The results will be shared across the broader charity sector in a series of events, including the Newton Charity Event on 26 November 2015. To watch the video please click here
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