Several charitable foundations who collectively pledged up to £50m for an impact investing initiative focused on young people have revised down their target after initial research.
Funders including the Children’s Society, Joseph Rowntree Foundation and Friends Provident Foundation received 60 applications from investment service providers (ISPs) after announcing their project in September last year.
The funders worked with an advisory group of young adults called the Future Generations Panel to ensure the voices of those impacted by investment decisions were heard.
After five shortlisted ISPs presented to the funders in March, £20m was committed, with £12m going to the Triodos Future Generations Fund.
“We expect further investment commitments from partners and others, but we do not expect to reach our initial target of £50m, which reflects the state of the sector,” a report published this week by the funders reads.
Lack of engagement with young people
In their report – titled An Inconvenient Youth – the funders said that the panel of young people asked uncomfortable questions to the ISP applicants and challenged the way funders thought about their investments.
The funders’ request for proposals (RFP) focused on intentional positive impact on future generations but they found that few applications directly engaged with young people.
Very few ISPs addressed conflict, genocide, and breaches of international law, despite this being a priority for the panel.
The funders’ RFP specifically excluded investments in weapons and armaments but almost half of applicants only applied an exclusion of controversial or nuclear weaponry.
Applicants overall were praised for their impact measurement and management, an area which the funders said had improved in recent years.
However, they raised further concerns about applicants’ pay gaps within their workforces and many were found to have a lack of alignment with charitable funders with regard to their ownership structures and governance.
More foundations ‘should be an inconvenient investor’
James Anthony, social investment portfolio manager at Friends Provident Foundation, said the panel of young adults “had high demands for the level of impact they expected, asked uncomfortable questions to ISPs, and challenged the way asset owners think about their investments”.
“Similarly, asset owners can and should be an inconvenient investor to ISPs: engaging robustly on ethical issues, acknowledging any trade-offs and asking for products that deliver high impact alongside reasonable financial returns,” he said.
“These conversations within the third sector are a start, and we know that risk, return and impact can be balanced to create real change for the way we manage investments within the sector.”
Danielle Walker Palmour, director of Friends Provident Foundation, said: “As endowed charities we know that endowments are the cornerstone of our financial resources, deeply embedded in the financial system.
“If we are to use our resources in service of future generations, we must ensure our investments embody that aim.”
