Written for Philanthropy Impact Magazine – Issue 31
There are plenty of reasons charities often look to align their investable assets with their theory of change. From staying true to founding principles, to unlocking greater mission potential and helping mitigate reputational risk, real transformation happens when purpose and capital work hand in hand.
Aligning your investable assets with your theory of change means integrating values and mission into your investment strategy. Developing a values-aligned approach helps organisations drive positive change while maintaining financial security.
Incorporating an impact lens into our investment strategy and one that still delivers healthy returns is truly a win-win for us. As trustees, we find ourselves more engaged in the portfolio now that it includes investments which are genuinely doing good. Now we are able to measure impact with our endowment pot as well as the funds we donate to grantees each year
Suzie O’Brien, Bishop Radford Trust, Trustee
Starting the conversation
The journey begins with a conversation – one that should start at the heart of your charity’s mission. Every investment decision makes an impact, and these decisions have the power to drive purposeful transformation.
If you’re unsure where to start, ask yourself: Does the purpose of your investments further the purpose of your charity, or are they inadvertently working against the very issues you exist to solve?
A guide for trustees
The Charity Commission for England and Wales’s recently revised investment guidance offers valuable advice to trustees navigating these decisions. At its core, the guide gets back to basics and asks the fundamental question: Why do charities invest? The answer is simple – charities invest to further their aims and objectives. Trustees are given investment powers to allow the charities they serve to do the greatest amount of good with the resources they have.
Trustees are in a unique position – they can enhance financial outcomes for their charity while also acting as changemakers for the communities and ecosystems their charity serves.
Here we’ve outlined four steps on how charities can align their investable assets with their theory of change, ensuring a holistic approach to both financial performance and meaningful impact.
1. Uncovering values and priorities
A good first step is to review your charity’s investment policy and reflect on how your assets support your charitable objectives. To align your charity’s investments with its theory of change, you first need to be clear on your investment priorities. This means having an open discussion among trustees and key stakeholders about the charity’s core values and the impact you want to make. Think about the global issues you want to address and how your investments can reflect these values. A values-drive investment manager can help to facilitate this thinking.
This process isn’t just about ticking boxes. It’s a thought-provoking conversation that gets trustees reflecting on how the charity’s values can shape the way assets are invested. Consider using frameworks like the United Nations’ Sustainable Development Goals (SDGs) to help identify areas where your charity can make a difference.
2. Building a purposeful portfolio
Once your priorities are clear, the next step is translating them into an investment strategy that reflects your charity’s goals. Building a meaningful portfolio is about more than avoiding companies with questionable practices; it’s about actively seeking investments that deliver solid financial returns and create the positive social and environmental outcomes in line with your theory of change. This approach goes beyond traditional financial metrics—it considers how investments can generate sustainable, long-term growth while supporting the values and causes your charity is committed to. Each investment should be evaluated through two key perspectives: financial performance and positive impact.
3. Active Stewardship
Investing with impact doesn’t stop once the portfolio is built. Active engagement with the companies and funds in which the charity invests is a critical part of ensuring long-term alignment with its theory of change. This is where trustees, in partnership with their investment manager and other key stakeholders, can use their influence to push for positive change, whether through corporate engagement or collaborating with partners in the sector.
As an example of how collaboration and active stewardship can lead to positive impact, three years ago Tribe invested in Assura, a company focused on healthcare infrastructure in the UK. Over this time, Tribe engaged with Assura on various subjects, in particular their goal to become a certified B Corporation (B Corp). Tribe partnered with them to help them understand how the certification process acted as a powerful management tool for the business. In the end, the business received 99.98% shareholder support for the resolution and became the first FTSE 250 to be certified as a B Corp.[1]
We are so grateful for the support of Amy (Co-Founder and Chief Impact Officer at Tribe Impact Capital) and the team at Tribe. Not only were they a fundamental catalyst in our B Corp journey, but they also supported us with wider engagement activities and have generally been a champion for collaborative working and good business. We are delighted to be a part of what we hope is a very long-term partnership.
Johnathan Murphy, CEO, Assura PLC
4. Staying involved
Ongoing involvement with your investment manager is key to ensuring your charity’s investments continue to align with its theory of change. Regular and transparent reporting are essential to monitor this. Trustees should receive regular updates on both the financial performance of their portfolio and the impact being generated. Whether it’s measuring carbon savings, job creation, or access to essential services, the metrics should reflect the charity’s priorities. Keeping a close eye on how investments are performing both from a financial and impact perspective enables charities to make informed decisions about their investments and adjust strategies as needed to ensure they stay on track with their mission and theory of change.
Conclusion
Aligning your charity’s investable assets with your theory of change is a powerful way to leverage your financial resources for good. By defining your values, building an impact-driven portfolio, and engaging in active stewardship, you not only strengthen the financial position of your charity, but also deepen its ability to drive lasting, positive change in the world.
[1] Assura. (July 2024). Assura becomes first FTSE250 B Corp.
