‘Don't be scared of it’: Foundations urged to invest responsibly
5 October 2021 at 5:19 pm
“I don’t think it’s very common these days to meet anyone who doesn’t think responsible investing is something to have at least had a serious discussion about at board level”
The head of an Australian community foundation recently recognised as a responsible investment leader is encouraging other foundations to follow its footsteps and commit to investing more ethically.
Australian Communities Foundation (ACF) has successfully met a pledge for 100 per cent of its investment portfolio to be responsibly invested, as part of a six-year journey to align the investments of its corpus with its mission and values.
ACF CEO Maree Sidey told Pro Bono News that with a corpus worth around $140 million, it was a major achievement to transition entirely to responsible investments.
She said the first step was to introduce negative screening – such as not investing in oil, gas and coal – to ensure they weren’t contributing to harm.
The foundation has then focused on taking an ABC approach, which stands for acting to avoid harm, benefiting stakeholders, and contributing to solutions.
Most of its investments are now in the B and C categories, such as through environmental, social, and governance (ESG) funds or impact investing.
Based on its performance in 2020, Responsible Investment Association Australasia (RIAA) named ACF a responsible investment leader in its annual benchmark report released last month.
The foundation rated highly on several criteria including transparency, systematic consideration of ESG factors, and being strong stewards for more sustainable assets and markets.
ACF was the only foundation to meet this rating, and Sidey said she was thrilled for ACF to be recognised in this way.
“We didn’t expect to get this recognition from RIAA, so we’re absolutely delighted,” Sidey said.
“But it’s bittersweet to be the only foundation on the list because while it’s a fantastic achievement, there are a lot of private and public foundations out there that are really interested in seeing their capital used for positive social and environmental outcomes.
“So we know that we’re not the only ones making moves in this space, and we’re hoping that others are going to follow.”
Foundations know responsible investing is important
ACF is also the only foundation in Australia that is a signatory to the UN Principles for Responsible Investment (UNPRI), which reflect the growing relevance of environmental, social and corporate governance issues to investment practices.
Sidey said she would like to see more foundations become signatories to UNPRI and show greater commitment to responsible investing.
She noted that the progress made by foundations in this area varied widely between organisations.
“But I would say that there would be very few foundations today that didn’t think it was important to be moving in this space,” she said.
“I don’t think it’s very common these days to meet anyone who doesn’t think responsible investing is something to have at least had a serious discussion about at board level.”
When speaking with foundation sector colleagues, Sidey said sometimes people think it takes a really big step, and that it has to happen all at once.
“And what we often say is, no, you just break it down into manageable goals that seem achievable for you and your foundation,” she said.
“There are a lot of people looking really closely at this issue that know it is important to their stakeholders, trustees and grant partners that their investments are in line with their mission.”
ACF says foundations shouldn’t be scared to make a change
Sidey added that foundations shouldn’t believe the myth that responsible investing doesn’t get good financial returns because it’s “absolutely not true”.
Research backs this up, with a RIAA report published last year finding that Australian responsible investment funds outperformed mainstream investment funds across one, three, five and 10-year time frames in 2019.
“I think a reason foundations are sometimes hesitant to [invest responsibly] is capital preservation, because they are fearful of losing financial returns,” Sidey said.
“But responsibly invested funds or corpuses actually held up incredibly well, if not better, than traditionally invested funds during COVID.”
Sidey said her advice for foundations looking to invest more responsibly was not to try and do too much.
Rather, she said foundations should just stick to their mission.
“If the mission of your foundation is to support women and girls, then focus on gender lens investing,” she said.
“If you’re out there to make a difference for the environment, think about environmental outcomes. Consistency across the foundation is really important.
“And finally, don’t be scared of it. That’s probably my biggest tip. This is a fascinating, really rewarding journey that we’ve been on.”