Why foundations should be responsible investors

Jackie Turpin

I very much welcomed Catherine Howarth’s article on ‘why foundations should be shareholder activists’ (Alliance, March 2013).

The Joseph Rowntree Charitable Trust, a Quaker foundation, would probably regard itself as having been a responsible investor for around 30 years. To begin with this was rooted in our trustees’ sense that it was not enough to seek to transform the world through our grantmaking, supporting people who address the root causes of conflict and justice. They also believed that the trust’s investments, and its behaviour as an investor, should reflect this aim.

Over the years we have sought to achieve this by investing in companies that operate with integrity and whose products or services meet people’s basic needs and protect the natural environment on which we all depend. Conversely, we have tried to avoid investing in companies materially involved in armaments, gambling, tobacco and new generation nuclear power stations, and to avoid speculative and opaque investments.

For a long time the trust managed this process itself. With the help of EIRIS, we regularly supplied our investment managers with a list of companies that we regarded as acceptable for our portfolio.

We were also shareholder activists, engaging with our investee companies if we had concerns about their activities. If a company was not willing to improve as quickly as we felt they needed to, we would ask our investment managers to divest from it; if the issue was particularly worrying, we would be willing to make our decision public. We also voted our shares at AGMs and, on occasion, co-filed resolutions.

More recently the trust has started to pass the baton of responsible investment directly on to its fund managers. We believe that managers who incorporate environmental, social and governance (ESG) issues into their routine investment will invest in companies that are sustainable into the long term and will produce financial rewards that reflect this. When selecting managers, we pay as much attention to their approach to ESG and stewardship in general as we do to their investment processes and performance.

When considering the former, it is not sufficient that a manager has signed up to the FRC UK Stewardship Code and other similar initiatives. We will expect them to have a real understanding of ESG issues, and to have a regular and productive dialogue about them with the companies in which they are invested. We also appreciate a willingness on the part of managers to follow up our specific concerns with investee companies.

That is not to say that we are leaving it all to our managers. We are still willing to engage directly with companies, particularly over issues of concern to our grantees, and the trust itself has signed up to the FRC UK Stewardship Code, the UN Principles of Responsible Investment and the Carbon Disclosure Project.

In addition, because we have only limited resources, we particularly welcome shareholder collaboration with other investors including the Church Investors Group and the Institutional Investors Group on Climate Change. It is in this spirit that we warmly welcome ShareAction’s Charity Responsible Investors Network initiative, which will bring together foundations and other charities working in this arena. We believe such cooperation will be in the interest of society at large as well as in our long-term financial interest.

Jackie Turpin
Head of Finance, Joseph Rowntree Charitable Trust

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