A growing number of charities have found that their investment portfolio income is not sufficient to meet their commitments, according to a new report.
The 2023 Newton Charity Investment Survey, published by Newton Investment Management, found an 18 percentage point decline over the past year in the proportion of charities experiencing “sufficient” returns on their investment portfolios to 67 per cent.
Of the charities consulted, 35 per cent had experienced negative returns on their investments, and a further 35 per cent reported returns of between zero and 3 per cent.
Despite this, just under 80 per cent of those asked said that investment performance had not affected their charity’s spending.
The majority of respondents said they were still experiencing financial pressure or negative impact from the cost-of-living crisis, at 89 per cent, while 59 per cent noted an increase in demand for their services.
But more than half of the charities surveyed did not believe the cost-of-living crisis was likely to have a lasting impact on their investment policy.
The report is based on data gathered between 2 May and 10 July from 86 charities with a combined £3.3bn in assets.
Levels of concern among charities had declined on most issues, the report notes, with the proportion of respondents who were very concerned about the long-term impact of the pandemic at just 12 per cent – down from 23 per cent last year.
Worries about the impact of inflation, rising salaries and the conflict in Ukraine had also dropped over the year, it adds.
Sarah Dickson, head of charities business development at Newton Investment Management, said the findings showed that charities were adjusting to a “shifting market environment”.
She said: “The backdrop for investors has now shifted, with an unprecedented market regime change underway following four decades of asymmetric monetary policy, lower inflation and increasing globalisation.
“In the midst of a cost-of-living crisis, with the added challenges of inflation and rising salaries, the adaptability and resilience of the sector is evident as charities are adapting to this ‘new normal’ while also still seeking to address longer-term concerns.”
Concern over cybersecurity and online threats had risen from 38 per cent to 44 per cent in the past year, the report notes. The proportion of charities worried about the impact of climate change had also increased by five percentage points.
The report also lays out several priorities for charities with investment portfolios, noting that 37 per cent felt it was very important for environmental, social and governance factors to be considered in their portfolio management.
It adds that, when asked, the vast majority of the charities said it was important for their trustees to reflect the values and requirements of their beneficiaries, with the figure rising from 66 per cent in 2022 to 81 per cent this year.
The report says the proportion of charities with an ethical exclusion policy reached 64 per cent this year – the highest Newton has seen over the past 10 years of this survey.
It notes that the scope of these policies has narrowed, with charities focusing on more specific areas rather than adopting a blanket approach to excluding companies.