Charities are resisting pressure to dilute their environmental, social and governance (ESG) investment policies, according to research from Rathbones.
In a survey of 100 senior charity executives with a collective £5bn in equity investments, 86% said it is important that investments have strong ESG credentials, with 89% suggesting the importance of ESG will increase over the next three years.
Despite this, 76% of respondents admitted they are coming under pressure to relax their ESG policies to deliver the higher returns needed to maintain services.
Kate Elliot, head of Rathbones’ Responsible Investment Centre of Excellence, said: “It is clear that charities are sticking to their guns on ESG investing despite growing talk about an ESG backlash or the need to compromise ESG principles in order to achieve higher returns.”
Indeed, 67% of senior charity executive respondents also said they intend to tighten their investment exclusion criteria over the next two years – versus 27% who will loosen them.
A third (31%) of assessed charities have already toughened their exclusion lists over the past two years, with just 3% cutting back and 66% maintaining.
ESG exclusion lists typically cover industries such as gambling and controversial weapons but more stringent exclusion criteria can be extended over the likes of oil and gas assets or the defence sector.
The majority (85%) of respondents to the Rathbones survey also said that an investment advisory firm’s ESG credentials are important in the selection process, with almost all noting ESG credentials will only become more important in the next three years.
“Charities are very much committed to delivering on their values, and ESG investing is central to that,” Elliot said.
“It is not a regulatory box-ticking issue for charities but central to their mission and purpose, helping them align their investments with the causes and communities they exist to support.”
The study further marks a shift in emphasis within ESG, as 87% expect the social component of the acronym to increase in focus over the next two years, compared with 73% anticipating a greater focus on environmental themes and 79% on governance.