What happens to a charity’s money when it’s not being spent on grants? And could those investments help build a fairer, greener future rather than quietly doing harm? To explore these questions, we spoke with our Director of Finance and Resources, Jenny Couper, following the launch of the Endowments Investing Challenge.

In this interview, Jenny breaks down what the challenge is all about, why it matters for places like Islington, and how decisions made in the world of finance can have very real effects on everyday lives. Jenny also explores why charities can’t afford to separate how they invest from why they exist – and how this initiative aims to push the investment world to think longer-term, more responsibly, and more courageously about the future.

In simple terms, what is the Endowments Investing Challenge?

Foundations such as Cripplegate often hold a large sum of money called an endowment that has been given to us from a number of donors over the years. We are not allowed to spend the endowment itself, but we are expected to invest this, so that it can provide us with an ongoing income stream (money) to help us deliver our charitable purposes over a long period of time into the future.

Cripplegate Foundation exists to challenge poverty and inequality in Islington and the ward of Cripplegate in the City of London, and we do this by providing grants and funding to local community groups and organisations. If the Foundation’s endowment isn’t invested well, we might not generate enough income to support our community in the short term, and/or the overall sum of money might shrink, which will mean less money for our community groups in the future.

We usually hire an ‘investment manager’ to look after the endowment for us and to make decisions as to how it is invested. It is important that the investment manager balances the need to provide us with this long-term income stream alongside strong consideration and ethics about how and where the money is invested.

“If the Foundation’s endowment isn’t invested well, we might not generate enough income to support our community.”

The Endowments Investing Challenge is an open process to look for a new investment manager, with the support and guidance of our Future Generations Panel. There are at least six Foundations and charities with their own endowments taking part in the challenge, and it is likely that other charities may also invest in the winner of the challenge. The reason for doing this publicly is threefold.

Why?

Firstly, we want the process to be very transparent. The investment process can be very difficult to understand, so we want to make this more accessible to people who don’t work in the finance or investment industry. In doing so, it will also help smaller charities who may not have the capacity or resources to run their own process to find a new investment manager that is aligned with their needs and values.

Secondly, by pooling resources and having a larger pot of money to invest, we can challenge investment managers to think more carefully and creatively about the particular needs of charities and to create ‘products’ which meet those needs.

And finally, we can challenge the current financial system, which often prioritises making money in the short term, without fully considering the long-term risks and negative impacts, which can create very negative consequences for the environment and for people’s lives. By running a public process which is likely to have significant media coverage, and focussing this on the needs of future generations, we are encouraging all investment managers to think about how they can become more responsible in their investment decisions so that the financial system does not create long term harm, but instead focusses more resources towards companies and industries which are trying to make a positive change for the future.

“We should be using our investments to support companies who can have a positive impact on the world both now and into the future.”

Why is it important for charities/foundations like ours to think about how we invest money, not just how we spend it?

Charities exist to deliver a benefit to the public, like relieving poverty, challenging inequality, providing education, protecting the environment, or promoting health and animal welfare. It would be hypocritical for us to provide this benefit through our income and grant making, while at the same time creating harm through our investments. For that reason, many charities will not invest in alcohol or tobacco production, gambling, adult entertainment, weapons, or fossil fuels, as these would be contrary to our charitable mission and values.

By extension of that principle, wherever possible, we should be using our investments to support companies who can have a positive impact on the world both now and into the future.

The Endowments Investing Challenge is about putting the needs of future generations first. What does that actually mean in practice when it comes to investing?

Charities need to consider not just their current beneficiaries, but also the people that we will support and those living in the world in the future. It is therefore vital that we consider any long-term impacts of our current investments.

So, for example, supporting an energy company that provides cheap electricity to local communities might seem like a good way of supporting our current charitable objectives on poverty, but not if the use of fossil fuels contributes to the negative impacts of climate change which will impact much more severely on those same communities in future generations.

“By putting the needs of future generations first, we are trying to rebalance this problem, and push investors to think more carefully about these long term impacts in their investment decisions.”

Another example is many young people today face the prospect of never being able to own their own home, and private rented accommodation can be both expensive and/or in poor condition. Therefore, investing in the development of affordable, high quality housing solutions is one way of using our investments to support the needs of both this and future generations.

It is not always easy to understand what the consequences might be for future generations, and it can be challenging to get investors to fully account for these when there is equal pressure for short term income. By putting the needs of future generations first, we are trying to rebalance this problem, and push investors to think more carefully about these long term impacts in their investment decisions.

Many people think of investments as something distant or complicated. How do these decisions impact everyday life here in Islington and beyond?

If you invest money in a company, you normally become a shareholder. This means you have some influence over the decisions that the company makes which impacts directly on people’s lives. For example, shareholders can encourage their companies to pay the Real Living Wage to their employees. We can also ask them to limit high pay outs to Directors, to reduce the pollution they create, and to reduce their impact on climate change.

And there are also really positive things that we can invest in, for example, we can invest in social or affordable housing for people who can’t afford or access private rental housing, or invest in green energy production (such as air source heat pumps and solar panels) which can reduce the costs of utilities for local people, or in the development of new technical solutions which make life easier for certain groups of people, such as medical aids for people with certain health conditions or disabilities.

All of these decisions can have a really positive impact on the everyday lives of people living in Islington.

Finally, what excites you most about being part of this initiative, and what change do you hope it sparks in the investment world?

I’m really excited to be part of this initiative, because it provides us with a real opportunity to challenge a financial system that isn’t currently working as it should putting the views of young people front and centre. By participating in this initiative, we are sending a signal to the financial system that it needs to change…to become more responsible in its approach, and through doing so, safeguard the planet for future generations. I’m also excited that this should make more finance available for companies trying to do good, and who seek to make a difference to the UN sustainable development goals.

“By participating in this initiative, we are sending a signal to the financial system that it needs to change.”

The timing is more important than ever. The political and cultural situation is precarious. We have seen a significant roll back on environmental protections and on EDI  (equity, diversity and inclusion) initiatives in many countries, the impacts of which are being felt globally. This is set against a trend of cutbacks in international funding for lower income countries, increasingly visible impacts of climate change, and increased inequality.

There is no better time than the present for the charity sector to use its voice to say we want something better for our communities and for future generations, and to use its investments to deliver this change.