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Therefore, there must be clear reasons why certain companies or sectors are excluded and, ideally, these should be clearly considered and documented by the trustees. Trustees should evaluate the impact of any exclusion on potential returns and balance the risk of lower returns with the risk of alienating the charity’s supporters and/or donors or damaging the charity’s reputation.
Such an assessment cannot be an exact calculation – it is an evaluation but one that must be carried out from the point of view of the charity rather than the views and ideologies of individual trustees.
WHAT SORT OF APPROACH CAN BE TAKEN WHEN APPLYING AN ETHICAL POLICY?
Essentially, there are three ways of screening investments when applying an ethical investment policy:
Ÿ Negative screening. This is where a charity decides not to invest in speci c companies or speci c sectors. For example, a religious institute charity may decide not to invest in certain pharmaceutical companies or in companies with poor environmental or human rights records which operate in countries in which the religious institute is operating
Ÿ Positive screening. This is where a charity positively invests in companies or sectors which re ect a charity’s values in areas such as environmental protection; health, human rights; or in companies that demonstrate good corporate social responsibility and governance. For example, religious institute charities with missions in parts of the developing world may decide to invest in retail companies that have shown consistently that they actively monitor and do not use manufacturers that have a poor record of working conditions and treatment of workers
Ÿ Stakeholder activism. This is where a charity deliberately invests in a company that it does not approve of in order to use the voting rights to attend an AGM and attempt to in uence the company’s policies to better re ect the charity’s values and ethos
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