Charities, ethical investing and air pollution

2 men cycling beyond body of water on their way to visit one of their favourite charities

Investing

Julie Hutchison

23rd June 2016 at 1:55pm

Where charities invest their money is increasingly under scrutiny, but some charities have been leading the way for some time.

Cancer charities, for example, have avoided investing in tobacco companies for years. Clearly it would be illogical for them to give financial support to companies whose products are a cause of the very diseases they are trying to find cures for.

Matching charity goals and investment strategy

This kind of strategic thinking continues to evolve, connecting investment criteria to charity goals.

It wouldn’t surprise me if we started to see an expansion of the ethical investment policies of health-focused charities to target (and exclude) other potential causes of disease. Air pollution could be one of these.

Air pollution kills millions

Urban air pollution is linked to up to one million premature deaths each year around the world. Vehicle emissions are in the spotlight as a major contributing factor to poor air quality, among other causes. Children living near roads with heavy traffic have double the risk of respiratory problems.

With this in mind, it’s interesting to observe a new frontier opening in the fight against air pollution.  Government bodies may find themselves the target of litigation as the right to breathe clean air is considered in the context of human rights law.

As a news report this June highlighted, one mother is taking legal action to investigate the role air pollution played in her daughter’s death from a severe asthma attack in London.

And it will be interesting to watch how the debate in Norway develops around the possible ban on the sale of all fossil-fuel based cars by 2025.

How charities could clean up their investment policy

With the link between air pollution and human health increasingly in the spotlight, some charities may choose to take a proactive approach if their goals are connected to cancer or respiratory illnesses.

What this looks like in practice could involve two stages.

Firstly, at a policy level, a charity board could choose to revise its investment criteria to address this theme.

Secondly, the charity’s investment manager would translate this into a practical screen to avoid investing in companies implicated in causing air pollution.

There’s more than one reason why a charity may do this.

Reputation wise, how would the charity’s supporters view it if the charity was seen to be investing in companies perceived to be contributing to one of the causes of the disease it was focused on curing?

Loss of reputation is a risk some household-name charities such as Comic Relief have had to address in the last few years when the absence of appropriate ethical investment criteria has caused embarrassment.

For a charity’s supporters to have confidence in a charity, good governance is important. This means keeping a charity’s investment policy under active review.

You can read more about the Charity Commission’s investment guidance for charity trustees here.

Read more articles from Julie Hutchison, our Charities Specialist, here.

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The information in this blog or any response to comments should not be taken as financial advice. Laws and tax rules may change in the future. Standard Life is not responsible for the content of external websites. The information here is based on our understanding in June 2016.