Cautiousness & social investment:understanding trustees’ concerns
Tue, 24 Mar 2015 16:56:00 GMT
On 18th March 2015 Professor Christopher Cowton, Dean of the Business School and a leading member of FEGReG, spoke at the second conference for charity trustees organised by Govtoday, at the Mermaid Centre, London. Entitled Trustee Investment 2015: Ethical, Efficient, Effective, the conference brought together charity trustees, financial leaders, and public policy experts to debate how the third sector can make optimum use of financial assets by looking at the three ‘Es’ of the title.
One of the exciting recent developments for charities is to invest for social return, rather than just financial return. However, there are impediments to the fulfilment of the potential of ‘social investment’. Professor Cowton spoke about Cautiousness and social investment: understanding trustees’ concerns, using his long involvement in the field to look back at ‘ethical investment’ in the 1980s and to draw parallels and distinctions with today’s social investment opportunities. He noted that, while some trustees will be unfamiliar with social investment and how it can be conducted, many of those who are more knowledgeable are still likely to be cautious. The Charity Commission has provided some useful guidance, including the idea of programme-related investments (PRI) and mixed motive investments (MMI) that complement more conventional financial investments. Even if they bring some financial return, PRIs are fully justified by their social return (i.e. in terms of the fulfilment of the charity’s aims); whereas MMIs are justified by both social and financial return, with neither sufficient on its own.
Professor Cowton commented, ‘So far, so clear. However, in practice, when is an investment to be viewed as a PRI, given that there might be the suspicion that the financial return matters? And when does a MMI have sufficient total return to be justifiable? It is easy to see why trustees might be nervous, given their responsibilities before the law. Things are likely to become clearer over the coming years, but it is important that trustees document clearly the reasons behind their decisions. Then, hopefully, they will be able to take advantage of the some of the social investment opportunities that are out there.’
