6. Equity, Diversity and Inclusion
Description
The board ensures that trustees/staff/committee members involved in the charity's investments commit to exploring, understanding and taking action with regard to equity, diversity and inclusion.
Rationale
An inclusive approach, where different voices are heard and the views of stakeholders are effectively considered, is the starting point to address inequities within investment practice. There is a growing understanding that a lack of diversity within charity investment practice, including among trustees, staff, committee members and in the teams of those providing investment management and advice, can lead to groupthink, power imbalances and result in weaker decision-making. When a charity addresses inclusion and diversity in a meaningful way, steps to make progress towards equitable investment practice can be determined and acted upon.
Key outcomes
- Those involved in the charity's investments understand how an inclusive approach, involving those from a diversity of backgrounds and perspectives, can lead to stronger decision-making.
- The input of a broad range of trustees and staff with different perspectives and experiences helps to ensure the charity's purposes are centred in its investment approach.
- The diversity of backgrounds and perspectives among investment decision-makers internally and externally are considered and the impact of this on investment decision-making is understood.
- Equity and impact are considered in the investment strategy in a way which is appropriate to the charity's size and investment approach.
Practice
Equity, Diversity and Inclusion
Inclusion
Trustees, staff and committee members create a meeting environment where behaving inclusively is the norm and those in the meeting can constructively challenge each other in regard to the charity's investments.
Ensuring meetings are inclusive involves work, particularly where some attendees have investment expertise and others might feel they must defer to those attendees with investment expertise.
In planning inclusive meetings, it is helpful to:
- appoint a chair who has experience or training in conducting inclusive meetings
- there is time and process to ensure alternative views are taken into account
- where a few individuals have investment expertise, how will their views be weighed against those with expertise in the charity's purposes
Those participating should have clarity from the outset about how any decisions will be taken, for example will each participant have a vote.
Discussions within the charity about equity, diversity and inclusion include investments as a topic. Where there is discomfort or a lack of understanding regarding how EDI might apply to investments, opportunities for learning are accessed.
Whilst many charities are considering EDI in relation to the charity's activities, exploring EDI in relation to investments is less frequent.
Methods to access learning include:
- exploring equitable investment strategies
- seeking paid for advice from an individual or organisation with EDI expertise
Where feasible and appropriate, trustees/staff/committee members explore the views of donors, grantees, service users and broader stakeholders in relation to investments to inform trustees in exercising their duty of care.
The trustees are responsible for ensuring the charity's investments support and further the charity's purposes. Whilst consultation with donors, grantees, service users and broader stakeholders is not a legal necessity it can play a valuable role in helping to explore how the investments support and further the purposes, and identifying potential conflicts and reputational risks to be avoided.
For some charities it might not be feasible or appropriate to consider stakeholder views, for examples those working with young children or groups unlikely to be able to engage with regard to investments.
Charities will need to carefully plan any stakeholder engagement to ensure there are feasible methods to act on or respond to stakeholder feedback.
Trustees/staff/committee members actively consider ways to engage with the views of stakeholders. This might include:
- surveys, or including the charity's investments in existing stakeholder surveys
- AGM reporting and opportunities for questions- a process for stakeholders to submit questions with a timeline for how these will be answered
- a role on the charity's committee as a participant or adviser for stakeholders with expertise or experience of the charity's purposes
Where needed, paying for the time or expenses of participating stakeholders can ensure a more level playing field for participation.
Reflection may also be needed on which individuals and groups within the charity's stakeholder constituency might have barriers to engaging.
See also Principle 7 - Communicating with stakeholders.
- Barking & Dagenham Giving Community Steering Group and Investment Policy
Diversity
A cross-section of trustees and staff explore the backgrounds and perspectives among investment decision-makers both internally and at external providers such as investment managers and investment advisers. Consideration is given to how a lack of diversity and inclusive practice can lead to decision-making which is narrow and rigid.
Diversity is considered in its broadest sense, both protected characteristics and social class background. Areas to explore might include:
- diversity of the internal or external team
- EDI commitments made by external providers
- understanding of the charity's purposes among investment decision-makers, for example through lived or learned experience
- ability to assess the negative impact of investments
- ability to stay up-to-date with developments in both the investment and charity sectors (such as responsible investment, ESG, EDI, community development finance)
The Diversity Project exists to create a more diverse and inclusive investment and savings industry.
Trustees/staff/committee members consider a diverse range of views and opinions on charity investment practice.
Equity
Trustees/staff/committee members act to be aware of evolving practice in relation to investment strategies that consider equity and impact. There are a range of areas which can be explored, and trustees/staff/committee members will need to prioritise those areas that are most consistent with the charity's purposes, and are appropriate to its size and available resources.
Areas for exploration might include:
Investment management, and the economy more broadly, have not historically taken equity, diversity and inclusion into account. While some practice is well underway, for example on the climate crisis and just transition, in other areas practice is still emerging, for example gender-lens or racial-equity investing. Exploration of these areas will depend on the charity's appetite, capacity and resources.
Where action is to be taken, charities should be deliberate about where they choose to focus their efforts - set targets and milestones, and be prepared to take action in a manner that the trustees decide is in the best interests of their charity, and which is consistent with its purposes and appropriate to its size and available resources.
Impact Investing Institute - Evolving your endowment: Driving change through impact investing
- responsible, impact and social investment approaches
- climate crisis and the just transition in relation to the charity's investments, including examination of systemic risks
A just transition seeks to ensure that the substantial benefits of a green economy transition are shared widely, while also supporting those who stand to lose economically – be they countries, regions, industries, communities, workers or consumers.
The climate crisis, and investments which contribute to that crisis, pose a number of risks for charity investors, including:
- investments which conflict with purposes
- investments which pose a reputational risk
- investments which pose a financial risk, for example as the climate crisis will lead to some companies and sectors under-performing or becoming obsolete.
There are also opportunities for charity investments, for example investments in renewable energy and activity which will help in the transition to a green economy.
Checking whether your bank provides fossil fuel financing.
Sixty four leading institutions and trusts in UK Higher Education, including the Universities of Cambridge, Edinburgh, Leeds, Oxford, Southampton, St Andrews, Westminster and University College London, have collaborated on a new effort to create a market for cash products that do not contribute to the financing of fossil fuel expansion.
The Carbon Tracker - Flying Blind reports analyses "whether companies and their auditors are assessing the financial impacts of climate and energy transition matters and reflecting these impacts in financial statements today".
- the origins of the charity's assets and ongoing extractive practice in the investment portfolio
Trustees/staff/committee members examine whether the charity's assets resulted from extractive practice or continuing extractive practice and where this is the case, consider steps to address this. This could involve recognising, exploring and being transparent about the origins of the organisation's wealth, or going further towards reparation and/or equitable investment. Examples of historic extractive practice include chattel slavery and colonialism, while examples of current extractive practice might include modern slavery or companies contributing to the climate and biodiversity crisis.
- learning about strategies which address inequities in the broader economy, for example inequality, gender-lens or racial equity investing
Racial Equity Scorecard - Pathway Fund with TSIC and EIRIS Foundation
Justice, Equity, Diversity and Inclusion (JEDI) investing
Taskforce on Inequality and Social-related Financial Disclosures (TISFD) is a global initiative to develop recommendations that enable businesses and investors to effectively identify, assess, and report on their inequality and social-related risks, opportunities, and impacts
2X Criteria - global baseline standard for gender finance
SPRING Accelerator Toolkit - to inspire investors to invest in companies that deliver positive impact on girls and young women
Intentional Endowment Network (US) resources bank
Compton Foundation/Sonen Capital (US) "Racial Equity in Investing Compass"
Nathan Cummings Foundation (US) integrating racial equity into the investment strategy
- exploring providing finance to groups which are marginalised within the mainstream economy
There is growing recognition that some individuals and groups are marginalised within the mainstream economy. Approaches to address this include seeking to invest in organisations which would struggle to access finance elsewhere, on terms which are equitable and provide patient financing. Moving capital from secondary investing (for example investing in shares of globally traded companies) to primary investing (providing finance for underserved organisations) has real world implications.
Discussions are held with the charity's investment managers and investment advisers to understand their approach to addressing equity and impact in the investment strategy.
EDI in relation to investments is an emerging area. Exploratory discussions with the charity's investment manager or investment adviser can be used as a learning opportunity for trustees/staff/committee members and to understand how the investment manager or investment adviser might report on EDI, equity and impact metrics relevant to the charity.
Charities of all sizes consider the importance of their voice and choice in addressing inequities.
As investors, charities have opportunities to make choices about their investments and use their voice to advocate for investment practice which addresses inequities.
This might include:
- publicly stating why a particular bank account, investment manager or investment adviser has been selected
- joining investment coalitions and collaborations to push for change
- publicising initiatives undertaken by the charity's investment manager or investment adviser to address inequities
EDI: Key action areas for investors
Charities are also exploring spending down their endowments to address historic inequities:
Where a charity holds social investments, the social investment strategy and approach considers power imbalances between the charity as the investor and the organisations receiving investment. This includes considering:
- investing on terms which are affordable, supportive, flexible and equitable
- taking due regard of the risks for the investee and seeking to share risks wherever possible
- exploring other methods of sharing power with investees
- monitoring data on the diversity of investees and having representation within the decision-making structure from individuals who reflect or can represent the experience of investees
Steps that can be taken to address power imbalances include:
- collecting data on investments made to individuals and organisations from underrepresented and underserved communities
- actively seeking to invest in underrepresented and underserved communities and groups
- providing catalytic grants, for example the Women in Safe Homes Fund has a catalytic grant element which takes a feminist approach and helps build potential investees’ capacity (such as conducting a feasibility study about acquiring properties or expanding a property portfolio for survivors of violence against women and girls) while the potential investees explore if social investment is right for them.
Equity, Diversity and Inclusion
Inclusion
Trustees, staff and committee members create a meeting environment where behaving inclusively is the norm and those in the meeting can constructively challenge each other in regard to the charity's investments.
Ensuring meetings are inclusive involves work, particularly where some attendees have investment expertise and others might feel they must defer to those attendees with investment expertise.
In planning inclusive meetings, it is helpful to:
- appoint a chair who has experience or training in conducting inclusive meetings
- there is time and process to ensure alternative views are taken into account
- where a few individuals have investment expertise, how will their views be weighed against those with expertise in the charity's purposes
Those participating should have clarity from the outset about how any decisions will be taken, for example will each participant have a vote.
Discussions within the charity about equity, diversity and inclusion include investments as a topic. Where there is discomfort or a lack of understanding regarding how EDI might apply to investments, opportunities for learning are accessed.
Whilst many charities are considering EDI in relation to the charity's activities, exploring EDI in relation to investments is less frequent.
Methods to access learning include:
- exploring equitable investment strategies
- seeking paid for advice from an individual or organisation with EDI expertise
Where feasible and appropriate, trustees/staff/committee members explore the views of donors, grantees, service users and broader stakeholders in relation to investments to inform trustees in exercising their duty of care.
The trustees are responsible for ensuring the charity's investments support and further the charity's purposes. Whilst consultation with donors, grantees, service users and broader stakeholders is not a legal necessity it can play a valuable role in helping to explore how the investments support and further the purposes, and identifying potential conflicts and reputational risks to be avoided.
For some charities it might not be feasible or appropriate to consider stakeholder views, for examples those working with young children or groups unlikely to be able to engage with regard to investments.
Charities will need to carefully plan any stakeholder engagement to ensure there are feasible methods to act on or respond to stakeholder feedback.
Trustees/staff/committee members actively consider ways to engage with the views of stakeholders. This might include:
- surveys, or including the charity's investments in existing stakeholder surveys
- AGM reporting and opportunities for questions- a process for stakeholders to submit questions with a timeline for how these will be answered
- a role on the charity's committee as a participant or adviser for stakeholders with expertise or experience of the charity's purposes
Where needed, paying for the time or expenses of participating stakeholders can ensure a more level playing field for participation.
Reflection may also be needed on which individuals and groups within the charity's stakeholder constituency might have barriers to engaging.
See also Principle 7 - Communicating with stakeholders.
- Barking & Dagenham Giving Community Steering Group and Investment Policy
Diversity
A cross-section of trustees and staff explore the backgrounds and perspectives among investment decision-makers both internally and at external providers such as investment managers and investment advisers. Consideration is given to how a lack of diversity and inclusive practice can lead to decision-making which is narrow and rigid.
Diversity is considered in its broadest sense, both protected characteristics and social class background. Areas to explore might include:
- diversity of the internal or external team
- EDI commitments made by external providers
- understanding of the charity's purposes among investment decision-makers, for example through lived or learned experience
- ability to assess the negative impact of investments
- ability to stay up-to-date with developments in both the investment and charity sectors (such as responsible investment, ESG, EDI, community development finance)
The Diversity Project exists to create a more diverse and inclusive investment and savings industry.
Trustees/staff/committee members consider a diverse range of views and opinions on charity investment practice.
Equity
Trustees/staff/committee members act to be aware of evolving practice in relation to investment strategies that consider equity and impact. There are a range of areas which can be explored, and trustees/staff/committee members will need to prioritise those areas that are most consistent with the charity's purposes, and are appropriate to its size and available resources.
Areas for exploration might include:
Investment management, and the economy more broadly, have not historically taken equity, diversity and inclusion into account. While some practice is well underway, for example on the climate crisis and just transition, in other areas practice is still emerging, for example gender-lens or racial-equity investing. Exploration of these areas will depend on the charity's appetite, capacity and resources.
Where action is to be taken, charities should be deliberate about where they choose to focus their efforts - set targets and milestones, and be prepared to take action in a manner that the trustees decide is in the best interests of their charity, and which is consistent with its purposes and appropriate to its size and available resources.
Impact Investing Institute - Evolving your endowment: Driving change through impact investing
- responsible, impact and social investment approaches
- climate crisis and the just transition in relation to the charity's investments, including examination of systemic risks
A just transition seeks to ensure that the substantial benefits of a green economy transition are shared widely, while also supporting those who stand to lose economically – be they countries, regions, industries, communities, workers or consumers.
The climate crisis, and investments which contribute to that crisis, pose a number of risks for charity investors, including:
- investments which conflict with purposes
- investments which pose a reputational risk
- investments which pose a financial risk, for example as the climate crisis will lead to some companies and sectors under-performing or becoming obsolete.
There are also opportunities for charity investments, for example investments in renewable energy and activity which will help in the transition to a green economy.
Checking whether your bank provides fossil fuel financing.
Sixty four leading institutions and trusts in UK Higher Education, including the Universities of Cambridge, Edinburgh, Leeds, Oxford, Southampton, St Andrews, Westminster and University College London, have collaborated on a new effort to create a market for cash products that do not contribute to the financing of fossil fuel expansion.
The Carbon Tracker - Flying Blind reports analyses "whether companies and their auditors are assessing the financial impacts of climate and energy transition matters and reflecting these impacts in financial statements today".
- the origins of the charity's assets and ongoing extractive practice in the investment portfolio
Trustees/staff/committee members examine whether the charity's assets resulted from extractive practice or continuing extractive practice and where this is the case, consider steps to address this. This could involve recognising, exploring and being transparent about the origins of the organisation's wealth, or going further towards reparation and/or equitable investment. Examples of historic extractive practice include chattel slavery and colonialism, while examples of current extractive practice might include modern slavery or companies contributing to the climate and biodiversity crisis.
- learning about strategies which address inequities in the broader economy, for example inequality, gender-lens or racial equity investing
Racial Equity Scorecard - Pathway Fund with TSIC and EIRIS Foundation
Justice, Equity, Diversity and Inclusion (JEDI) investing
Taskforce on Inequality and Social-related Financial Disclosures (TISFD) is a global initiative to develop recommendations that enable businesses and investors to effectively identify, assess, and report on their inequality and social-related risks, opportunities, and impacts
2X Criteria - global baseline standard for gender finance
SPRING Accelerator Toolkit - to inspire investors to invest in companies that deliver positive impact on girls and young women
Intentional Endowment Network (US) resources bank
Compton Foundation/Sonen Capital (US) "Racial Equity in Investing Compass"
Nathan Cummings Foundation (US) integrating racial equity into the investment strategy
- exploring providing finance to groups which are marginalised within the mainstream economy
There is growing recognition that some individuals and groups are marginalised within the mainstream economy. Approaches to address this include seeking to invest in organisations which would struggle to access finance elsewhere, on terms which are equitable and provide patient financing. Moving capital from secondary investing (for example investing in shares of globally traded companies) to primary investing (providing finance for underserved organisations) has real world implications.
Discussions are held with the charity's investment managers and investment advisers to understand their approach to addressing equity and impact in the investment strategy.
EDI in relation to investments is an emerging area. Exploratory discussions with the charity's investment manager or investment adviser can be used as a learning opportunity for trustees/staff/committee members and to understand how the investment manager or investment adviser might report on EDI, equity and impact metrics relevant to the charity.
Charities of all sizes consider the importance of their voice and choice in addressing inequities.
As investors, charities have opportunities to make choices about their investments and use their voice to advocate for investment practice which addresses inequities.
This might include:
- publicly stating why a particular bank account, investment manager or investment adviser has been selected
- joining investment coalitions and collaborations to push for change
- publicising initiatives undertaken by the charity's investment manager or investment adviser to address inequities
EDI: Key action areas for investors
Charities are also exploring spending down their endowments to address historic inequities:
Where a charity holds social investments, the social investment strategy and approach considers power imbalances between the charity as the investor and the organisations receiving investment. This includes considering:
- investing on terms which are affordable, supportive, flexible and equitable
- taking due regard of the risks for the investee and seeking to share risks wherever possible
- exploring other methods of sharing power with investees
- monitoring data on the diversity of investees and having representation within the decision-making structure from individuals who reflect or can represent the experience of investees
Steps that can be taken to address power imbalances include:
- collecting data on investments made to individuals and organisations from underrepresented and underserved communities
- actively seeking to invest in underrepresented and underserved communities and groups
- providing catalytic grants, for example the Women in Safe Homes Fund has a catalytic grant element which takes a feminist approach and helps build potential investees’ capacity (such as conducting a feasibility study about acquiring properties or expanding a property portfolio for survivors of violence against women and girls) while the potential investees explore if social investment is right for them.
