Charities across the UK have been forced to review their investment activity with fundraising severely impacted by the pandemic, according to findings from Newton Investment Management’s seventh annual Charity Investment Survey.

Newton Investment Management, a global investment management firm and part of BNY Mellon Investment Management, surveyed 114 UK charities with combined investment assets of £6.2 billion, uncovering the key issues impacting their investment thinking and decision making during the global covid-19 pandemic.

The survey revealed that the pandemic has not only affected the investment returns charities receive, but also triggered a change in behaviour in how charities think about their investment portfolios now and in the future. Approximately half of the charities surveyed by Newton, stated that the pandemic has prompted a wider review of their activities, and that policies around contingency planning have had to be updated.

Nearly a third of respondents stated that the pandemic has affected their future investment strategy. Of these, 88% anticipate a drop in their investment income, and half stated they have already seen a significant drop in investment returns. Of those investment strategies that have been affected by the pandemic, just over half are re-evaluating their reserves policy, while 27% noted that there have been changes to spending levels from their investment portfolios.

As for the impact on fundraising, 81% of charities reported that their fundraising decreased as a direct result of the pandemic. The impact on fundraising has been particularly pronounced for larger charities; 100% of charities with assets of over £101 million stated that they have seen a decline in fundraising. However, larger charities appear to have been better able to source government support than their smaller counterparts. Of charities surveyed, 56% reported having to lay off or furlough staff since the start of the pandemic, with 52% having to cease some of their operations.

Outside of the impact of the pandemic, the survey found that charities continued to prioritise environmental, social and governance (ESG) factors when it comes to investing. Fossil-fuel-free investing remains a minority practice, but a growing one. The proportion of charities excluding some or all fossil-fuel investments has risen to 20% in 2020, the highest proportion recorded in the survey’s history.

For the second year in a row, ‘ethics’ was the most common response when charities were asked to identify issues that they would like their investment managers to address. It was also the third consecutive year that charities’ use of ethical exclusion policies increased with 59% of charities surveyed now including ethical exclusion policies. Between 2017 and 2020, the proportion of charities reporting planned expansion for their exclusion policies increased by 23%, with growth of 12% and 9% in 2018 and 2019, respectively.

It is clear from charities’ responses in our survey, as well as the direct work that we’ve been doing with our charity clients, that few have been untouched by the impacts and investment uncertainty caused by the pandemic. From fund raising, to charities contemplating their reserve investments, to grant-giving endowments contemplating income and future returns, charities have reported significant changes as a result of the pandemic.

But the pandemic’s impact on the investment world has accelerated a number of pre-existing trends. This has been the case for ESG, particularly in the rising prominence of E and S factors, as well as a growing importance placed on stewardship through engagement with investee companies. At Newton Investment Management, we are supporting our charity clients to navigate these uncertain times. Sustainability in investing continues to be a priority, putting ESG considerations at the core of the investment process.

Alan Goodwin, head of investment relationship management at Newton

The Newton Sustainable Growth and Income Fund for Charities will soon be available, which aims to support UK charities’ evolving needs. The Fund will adopt an income and growth focused investment objective. It will also adhere to Newton’s sustainable investment criteria which prohibits investments in issuers of securities that breach the UN Global Compact; or are incompatible with a 2 Degree World (the Paris Climate Accord); or are deemed to have material and unresolvable ESG issues; and/or derive more than 10% of turnover from tobacco production and sale.

Please find the full results of the survey here: https://www.newtonim.com/uk-charities/insights/the-newton-charity-investment-survey/

Notes to editors:

Newton Investment Management Limited (Newton) is a London-based global investment management subsidiary of The Bank of New York Mellon Corporation. Newton is authorised and regulated by the Financial Conduct Authority and registered with the US Securities and Exchange Commission. Registered address, BNY Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England No. 01371973. With assets under management of £45 billion as at 30 June 2020, Newton provides investment products and services to a wide range of clients, including pension funds, charities, corporations and (via BNY Mellon) individuals. News and other information about Newton is available at www.newtonim.com and via Twitter: @NewtonIM.

BNY Mellon Investment Management is one of the world’s largest investment managers, and one of the top U.S. wealth managers, with US$2 trillion in assets under management as of June 30, 2020. The firm is built around delivering to investors a “best of both worlds” approach: the expertise and world-class capability of our individual investment managers, wedded to a global geographic footprint, and guided by an unshakable commitment to financial stewardship. BNY Mellon Investment Management encompasses BNY Mellon’s affiliated investment management firms, wealth management services and global distribution companies.

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