In the UK, the top 300 charities with endowments have approximately £72 billion in invested assets. The “classic investment approach” of charities with endowments involves investing the endowment in the capital markets with a view to, principally or exclusively, generating good risk-adjusted financial returns, with at least a portion of those returns applied to operational work or distributed as grants.

This “classic investment approach” is not the only one available to trustees and it appears that trustees are increasingly aware of alternative strategies to investing an endowment. The 2021 Newton Charity Investment Survey revealed that 94% of charities surveyed believe that, beyond exclusions, it is their responsibility to invest responsibly, a figure which is increasing year on year.

In this paper, we explain why we think charity trustees should feel confident in concluding that, in the round, both from a “mission lens” and a “financial lens”, impact investing is an approach which can most effectively advance the objects, mission, and work of the charity as a whole.

We are grateful to Bates Wells and Herbert Smith Freehills for drafting this paper, Farrer & Co. and BDB Pitmans for reviewing it and to the Esmée Fairbairn Foundation and the Department for Digital, Culture, Media and Sport for providing funding support.

You can download the full paper below.

Report date: February 2022
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