In 2026, what does a fit-for-purpose responsible investment framework look like for trustees balancing mission, risk and return?
As responsible investment approaches have evolved and developed, the range of options available to trustees has expanded far beyond just a list of prohibited activities.
Exclusions can still play an important role, but they have been joined by a much wider toolkit of complementary approaches.
A core foundation of many responsible investment approaches is ensuring environmental, social and governance (ESG) issues are considered as part of the investment process, allowing for a wider view of risks and opportunities that might impact the financial outlook of individual companies, industries or the economy as a whole.
Setting expectations for your managers to take an active approach to engagement and stewardship can help manage and mitigate ESG risks and encourage improvement over time in the social and environmental performance of underlying investments.
This might be through dialogue with investee companies, voting at AGMs or collaborating with others to encourage systemic change.
In practice, a good framework is one that is mission-aware but investment-led: proportionate, evidence- based, and focused on decisions that protect long-term returns while aligning capital with the charity’s values.
How should charities prioritise responsible investment issues and engagement areas in a way that is proportionate and aligned with their resources?
A good starting point is establishing a clear understanding of the charity’s purpose and mission and the role that any investments need to play in supporting it. This should include consideration of the investment time horizon, risk appetite, objectives for financial return and mission-alignment.
Prioritisation starts with identifying areas where the charity’s mission and investments overlap and what approaches can be used to maximise alignment. Activities that are in direct conflict with a charity’s mission (eg a cancer research charity and tobacco) can be managed through exclusions.
Broader issues could then be considered through a matrix mapping topics by mission relevance, portfolio exposure and potential risk.
From there, trustees can identify their core priorities and build expectations around those, whether that be through further exclusions, seeking to align investments with positive social or environmental themes or expectations on engagement activity.
This keeps the approach disciplined and achievable, ensuring the charity concentrates on decisions and topics most relevant to its mission.
What should charities expect fund managers to evidence on responsible investment – across integration, stewardship and outcomes – and where is the line between essential information and nice to have?
Trustees should expect a reporting approach that gives them insight into risks, opportunities and outcomes without becoming a drain on governance capacity.
There are three core areas that investment managers should be able to demonstrate:
Integration: how ESG risks and opportunities are assessed within investment decisions, and what difference this analysis makes. This should include real examples, not generic statements.
Stewardship: evidence of engagement activity, how issues are prioritised, how progress is tracked and how voting decisions align with stated policies. Trustees should expect transparency on how managers react and escalate activity if engagement stalls.
Outcomes: bringing the theoretical back to reality. How has the charity’s responsible investment policy been implemented in practice?
How has engagement activity translated into real-world change? Is the manager clear on where they can and can’t claim influence and impact? The line between essential and “nice to have” will vary according to a charity’s aims and objectives for responsible investment.
But what doesn’t change is the need for information to be clear and understandable and, most importantly, relevant to the charity and its aims.
Quality over quantity is the key factor here. Detailed ESG reports, glossy impact metrics or overly technical modelling may give the impression that all bases are covered, but if these do not assist trustee understanding or decision-making then they serve no real purpose.
How can charities report progress on responsible investment credibly to stakeholders, without over-claiming or relying too heavily on imperfect data and evolving standards?
Credible reporting focuses on what the charity can control and avoids promises it cannot substantiate.
The most effective approach is often to explain the decision-making framework and context. What has the charity prioritised, how decisions are taken, and how the investment manager is held accountable.
Trustees can then provide examples of changes made during the year, whether in policy wording, risk oversight, or specific stewardship outcomes.
Data and metrics can be useful proof points, but often stories and narrative reporting are a more effective way of communicating with wider stakeholders.
This is particularly true if those stakeholders have little or no experience or understanding of investments and how they can be aligned with a charity’s mission.
Transparency can be a very powerful tool in building trust with stakeholders, as can honesty about areas that may not be perfect today. Recognising progress, outlining areas where evidence is still emerging and being clear about where the charity is still learning can all help build a sense of shared purpose with beneficiaries, donors and broader stakeholders.
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