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An unexpected way to make your charity’s funds go further

Charities work tirelessly at fundraising to build up reserves. In fact, 73% of charity CEOs we spoke to shared that fundraising was their biggest challenge. But, what if there was a smarter way to stretch that money further? We spoke to Ed Cufflin, a Senior Investment Manager at Charles Stanley, about investing charity funds ethically and effectively. From understanding your investment options to aligning your choices with your charity’s mission, this conversation is for charity CEOs and Trustees who want to make the most of every penny.

Why charity investment matters

Ed shared how charity leaders and Trustees are “experts in their own fields,” but “investing is quite a specialist area” leaving many feeling underqualified as financial decision makers. “To be in control of hundreds of thousands of pounds in charity budgets is quite daunting”. As a result, charity leaders often “take the path of least resistance”. With everything being busy, the potential to lose money is sometimes considered just too risky. 

Ed’s key message was that charity leaders must try to engage with the idea of investment. To look at it more objectively, take on the advice of someone like him, and be open to the idea of “making more without putting too much at risk.”

The ethical challenge of investing charity funds

There’s also the ethical concern that you could be investing in companies which do not align with your charity’s values. Ed highlighted that the issue with outsourcing to an investment company is that they may not see how important sustainable and ethical investment is to you. And more importantly, the frameworks in place for measuring a company’s ethical positioning (ESG- Ethical, Sustainable Governance) does not always mean a company aligns with a charity’s values. For example, BP have a great ESG score, but investing in a huge energy company could be detrimental for a charity’s reputation and role in the charity space- especially if sustainability is at the forefront of your charity’s mission. Subsequently, it’s clear that choosing to work with the right investment advisor is crucial. You need to trust your money will be invested wisely and in alignment with what matters to you.

Creating a charity investment policy

Ed noted that many charities lack formal investment policies and often have outdated or poorly managed investments. The Charity Trustee Act 2000 suggests that a well governed charity must “have some form of an investment policy statement”. Knowing what investment would actually look like and recording it in a policy is the first step to making better use of those pools of money. This policy can incorporate a section on the desire to invest ethically.

Please find investment guidance for charity Trustees here.

Working with an investment adviser

According to the Charity Trustee Act, Trustees have the general power to make any kind of investment – but they must take proper advice from a qualified person, unless they have sufficient expertise. It’s worth speaking to an investment adviser at this early stage, to ensure you cater to your standards, whilst not restricting yourself too much. Ed said that “a desire to do good, might actually prevent you from doing anything.” He suggested that impact investing, with a goal to make change with that investment, can severely restrict the opportunities for the charity to see any return. Clearly balance is crucial.

Revisiting old charity investments

A large part of Ed’s work also incorporates working with charities and Boards to assess where their money is currently being invested. Often a Board member from years prior will have set up an investment, and Ed’s role includes zooming out on financial decisions and ensuring the charities previous existing investments align with the organisation’s values and objectives too.

Making the most of charity reserves

Who you work with, and what your charity invests in matters. But it is also crucial for charities to make the most of every penny that they have. Money that is sitting in reserves can be doing more, and with that will come the opportunity to make more of an impact.

Thank you to Ed for speaking with us. Get in touch with him at ed.cufflin@charles-stanley.co.uk.

Image: Pexels

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