Key findings from the 2021 Newton Charity Investment Survey.

Key points:

  • Charities’ investment strategies remain remarkably consistent.
  • Charities have never felt it more important that ESG factors are considered in the management of their investment portfolios.
  • There has been a significant shift from engagement to divestment when ensuring climate change factors are considered in the management of portfolios.

While charities continue to suffer significant disruption from the coronavirus pandemic, this year’s survey tells a story of resilience and recovery, with the vast majority of charities remaining steadfast in their investment strategies. Meanwhile, charities are attaching increasing importance to societal and environmental issues such as climate change, with the vast majority believing they are obligated to invest responsibly. These are among the conclusions from Newton’s annual survey of leaders and decision-makers in the UK charity sector.

The Newton Charity Investment Survey has now delivered eight years of unique industry insight and trend comparisons. It covers diverse aspects of the management of charitable portfolios, and provides an industry benchmark to see how aligned charities’ investment experience and intentions are with those of their peers. Key findings from the 2021 survey include:

Investment strategy remains remarkably consistent, with just 20% of charities stating that the pandemic has affected their investment strategy.

Among charities with affected investment strategies, a drop in investment income is the most prominent issue, reported by 75% of affected charities. Other impacts include re-evaluation of reserves policies and a significant drop in returns.

Impact of the coronavirus pandemic on charities’ investment strategy

Text, Plot, Diagram

Data set: No. of respondents: 2020: 34; 2021: 16

Following the unprecedented disruption and low investment returns seen in last year’s survey, charities have seen their investments bounce back in 2021.

The average percentage performance gain has more than doubled from 5% to 11% from 2020 to 2021. 52% of charities reported performance gains of 9% or higher in 2021, a 35% increase on 2020.

The uncertainty about the future created by the pandemic in 2020 has subsided significantly.

In 2020, in the midst of the disruption caused by the pandemic, 11% of charities stated that they just did not know what level of return to expect over a 3-5-year timescale, with the figure reaching 13% with regard to the 10-year time horizon. 2021 has seen these figures return to their previous norms, with just 5% and 6% of charities unable to estimate their annual total returns over the next 3-5 and 10 years respectively.

2021 represents the first year since the survey began in which charities have held a greater proportion of their combined equity and bond allocation overseas than in the UK.

Since 2014, the proportion of equities and bonds held within the UK has fallen from 44% to 37%, while the proportion of equities and bonds held overseas has increased steadily from 29% in 2014 to 42% in 2021.

Portfolios’ approximate allocation across UK and overseas equities and bonds

Plot, Number, Symbol

Data set: No. of respondents: 2014: 52; 2015: 86; 2016: 76; 2017: 82; 2018: 93; 2019: 98; 2020: 105; 2020: 77

Charities have never felt it more important that environmental, social and governance (ESG) investment factors are considered in the management of their investment portfolios.

In 2021, 85% of charities feel that ESG factors are either very or quite important in the management of their portfolio. This represents a 3% rise year on year, but more striking is the growth over the longer term; from 2015 to 2021, the proportion of charities that feel that ESG factors are important has grown from 61% to 85%.

There has been a significant shift from engagement to divestment when it comes to ensuring that climate-change factors are considered in the management of portfolios.

From 2019 to 2021, the proportion of charities considering engagement to be the best approach has fallen from 70% to 54%, while the proportion believing that divestment is the best approach has increased from 24% to 35% over the same period.

What do you think is the best approach for ensuring climate change factors are considered in the management of your investment portfolio?

Number, Text, Symbol

Data set: No. of respondents: 2019: 102; 2020: 114; 2021: 82

More about the survey

This year’s survey included 82 charities, with a combined £8.8bn in assets under management. Fieldwork took place between 4 May and 1 July 2021, with 31 March 2021 representing the record date for annual investment performance data. For the majority of questions in the survey, eight years of data has now been collected on a wide range of issues, allowing for historical analysis of trends and beliefs.

View the full survey report

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