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Foundation Scotland creates £20m impact investment portfolio

09 Mar 2021 News

One of Scotland’s largest charitable foundations has moved £20m of its endowment into funds focused on social impact.

Foundation Scotland made the shift last year, allocating around a third of its stewarded assets to a portfolio committed to realising social impact as well as financial returns.

In an article for the March issue of Civil Society Media's Charity Finance Magazine,  Angus Tulloch, one of the foundation’s trustees, said that there was “a reasonable chance that long-term investment performance could indeed be enhanced” through the strategy.

Look again at funds

Foundation Scotland has distributed more than £100m to charities in the last 25 years, and expects to distribute £20m in 2020-21 as part of its work with the Scottish National Emergencies Trust.

It holds £50m in stewarded funds, which are managed by external fund managers.

In 2019, the trustees asked the fund managers to “look more closely” at the social impact of the corporate entities in which they invested, Tulloch wrote, with a particular focus on tax practices, excessive bonuses and the risk of exploitation in supply chains.

Impact investing

Tulloch wrote: “Before the year was out, we were looking to go a step further by formally obliging fund managers to invest solely in impactful companies.”

Foundation Scotland used the results of the ESG Investing Olympics to narrow down a field of potential fund managers to take charge of the impact portfolio, and eventually chose EQ Investors.

This portfolio owns 12 impact-focused funds which holds stakes in approximately 330 companies. This satisfied the trustees’ wish to diversify the portfolio, in which no individual company represents more than 2.5%.

‘Sleepy trusts’ project

In a separate project, Foundation Scotland is working with the Scottish charities regulator to revive dormant assets north of the border.

The foundation is working with the Scottish Charity Regulator (OSCR) to identify so-called “sleepy trusts” which appear to be inactive, and support them to reactivate by using funds that are lying dormant.  

Those trusts will be identified according to the number of grants they have made in recent years and whether they have filed accounts with OSCR.

A similar programme led by the Charity Commission in England and Wales in 2018 unlocked £32m from dormant funds. 

Giles Ruck, the chief executive of Foundation Scotland, said “This is an exciting opportunity to modernise many historic trusts, and revitalise others, and enable them to invest in our communities once again.”

The Revitalising Trusts project is expected to launch in April. 

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