The Present & Future of Charity Boards

Julie Hutchison is the Charities Specialist at abrdn, in the award-winning Charities Investment Team which sits within the UK discretionary management business. Julie’s been in role for nearly seven years, during which time the charity AUM has more than doubled. Her experience spans the charity, private, public and academic fields, building on her background in law where she specialised in trusts and philanthropy before moving into financial services eighteen years ago. Julie supports the company’s charity, endowment and foundation investment clients on governance and policy issues, in particular where boards are looking to refresh their investment policy statement to consider responsible investment and ESG matters. The Charities Investment Team comprises Portfolio Managers who focus on managing investments for charitable institutions, ranging from household-name charities to less well-known endowments and trusts. In particular, the team has a depth of experience in managing portfolios for grantmakers, health and hospice charities, education bodies and conservation charities.

Julie, tell us a little bit more about your role.

My own role is not portfolio management, but rather I find I act as something of a sounding board for the CEOs, Finance Directors or Investment Committee Chairs of clients on a wide range of policy and governance issues. In doing so, I draw on the full range of my experience in the legal and financial sectors, as well as my academic role at Edinburgh Napier University where I am a Visiting Professor in Governance and Innovation. The forward-thinking approach to flexible working at abrdn plc has enabled me to move to part-time hours in recent years, to accommodate my academic work.

abrdn plc has offices around the globe with a global AUM of £542bn (as of 31 December 2021). The focus of my work involves supporting colleagues in the specialist Charities Investment Team in London, Edinburgh and Leeds in particular, as well as liaising with colleagues in our Jersey office. The firm offers investment solutions for charities across the spectrum ranging from liquidity funds to ethically screened bespoke portfolios, to private market solutions.

What are the current trends for charity investors?

First and foremost, I’ve had a series of conversations with charity boards recently about environmental themes and how they can be reflected in their investment policy and portfolio. This began before COP26 in Glasgow and has continued since, in particular for health bodies and charities focused on young people. There are a range of options abrdn offers charity clients in how they can look to align their portfolio with their charitable purposes. For some charities, they choose to stay invested in oil and gas, preferring that we focus our plc efforts on engagement and voting to influence corporate change in companies that way (to the extent we can alone, or with others in industry coalitions such as Climate Action 100+). Other charities choose to exclude investment in coal/tar sands, for example or have screens relating to biodiversity. There are also a number of charities that avoid investment in coal, oil and gas, either for alignment with their charitable purposes or reputational risk reasons.  It’s not a “one size fits all” approach.

A reason that we are able to go into depth in how we accommodate individual charity requirements is due to our investment approach, which involves global stock-picking. This means a charity is not faced with a ‘take it or leave it’ pre-determined set of screens that come with a fund: instead, screens can be shaped individually by each charity and we then apply these at individual stock level across a bespoke portfolio of stocks.

A more recent trend has been around positive impact investment, aligned to the UN Sustainable Development Goals.  This approach filters investments to focus on those addressing the world’s key challenges, such as clean water, clean energy and good health, to name just three.

A new development in the last year or so has been the interest shown by some charities in taking on board the input from key stakeholders when framing their investment policy approach. For education bodies, this can involve pupils or students. For other institutions, it can involve members of staff. I’m always pleased to see organisations placing value on that kind of engagement activity and finding ways to incorporate the input received into the end policy – it’s healthy good governance.

A more recent trend has been around positive impact investment, aligned to the UN Sustainable Development Goals.  This approach filters investments to focus on those addressing the world’s key challenges, such as clean water, clean energy and good health, to name just three.

What is abrdn’s own approach to charitable giving?

This is something we’re often asked about, as people want to know what kind of company we are and how we interact with the voluntary sector.  There are a number of strands to this.  At a very local level, during lockdown, we focused on supporting local parklands. Many of us discovered local parks we had not been in before or parks we had not visited in years, during the time when daily walks became part of the necessary rhythm of life. In more recent times, reflecting abrdn’s future focus, we have formed a partnership with Hello World, to fund WIFI hubs in Uganda for online education.  We’ve recently formed a three-year partnership with UNESCO to support programmes on environmental sustainability, climate change and ocean science.  We’re also co-creating the Centre for Investing Innovation at the University of Edinburgh.

What are some of the challenges facing charity boards at the moment?

Recruitment of trustees often comes up as a theme. I’d encourage anyone reading this to consider whether they might be interested in volunteering some of their time as a charity trustee or finance committee member – finance experience is always sought-after on a charity board.

During lockdown, we launched a webinar series specifically aimed at new trustees, called ‘Next Gen Now’.  We’ve covered various topics, including how to read and interpret charity accounts (which have their own accounting standards and norms); and an overview of the many different underlying legal structures to be found in the charity sector. We’ve also looked at case studies of how a charity can change its structure. We’ve found our webinar programme better attended than in-person training events ever were. Our NextGen Now webinars are free and open access – visit abrdn.com/discretionary for more information and to view previous webinars.

What does the landscape look like for charities in the next year or two?

One area to watch is the kind of reporting required in the trustees’ annual reports and accounts. The accounting standards are currently under review and it’s possible that trustees will need to report on a wider range of matters, such as environmental measures. This would not be a surprise, given all parts of the economy and society are going to be in transition to net zero in the period ahead, and measures are likely to emerge to track progress in that area.  The carbon footprint of an investment portfolio could be part of that picture, and we’re already seeing interest from charities about that kind of expanded reporting for their investments.

For more information, visit: https://www.abrdn.com/

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