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Unethical Investing by Charities

Unethical Investing by Charities

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Published by Ron Robins
Unethical Investing By Charities
It is strange that many Western charities still invest their funds in companies whose activities create the very difficulties they are trying to alleviate. But such problems can be minimised if charities create well designed ethical investment policies.
Unethical Investing By Charities
It is strange that many Western charities still invest their funds in companies whose activities create the very difficulties they are trying to alleviate. But such problems can be minimised if charities create well designed ethical investment policies.

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categoriesBusiness/Law, Finance
Published by: Ron Robins on Dec 30, 2010
Copyright:Attribution Non-commercial

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12/30/2010

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Unethical Investing By Charities
By Ron Robins, Founder & Analyst,Investing for the SoulBlogEnlightened Economics;twitter First published October 21, 2010, in his weekly economics and finance column atalrroya.comIt is strange that many Western charities still invest their funds in companies whoseactivities create the very difficulties they are trying to alleviate. But such problemscan be minimised if charities create well designed ethical investment policies.In a 2009 UK survey, the Charity Project and the Charity Finance Directors Group(CFDG) found that of its 164 member charities with investments over £1 million, 60per cent had an ethical investment policy, while just 25 per cent of smaller charitieswith investments under £1million had one.A prime example of the dilemma charities face without a strong ethical investmentpolicy was exposed in a Los Angles Times January 2007 article. It detailed an absurdsituation that the Bill & Melinda Gates Foundation found itself in. This foundation isprobably the largest in the world and was founded by Microsoft co-founder multi-billionaire, Bill Gates, and his wife Belinda.The Los Angeles Times stated that, “the [Bill & Melinda] Gates Foundation haspoured $218m into polio and measles immunization and research worldwide,including in the Niger Delta. At the same time that the foundation is fundinginoculations to protect health, The Times found, it has invested $423m in Eni, RoyalDutch Shell, Exxon Mobil Corp, Chevron Corp and Total of France — the companiesresponsible for most of the flares blanketing the delta with pollution.” Continuing, “oil workers… and soldiers protecting them [in the Niger Delta] are amagnet for prostitution, contributing to a surge in HIV and teenage pregnancy, bothtargets in the Gates Foundation's efforts to ease the ills of society, especially amongthe poor. Oil bore holes fill with stagnant water, which is ideal for mosquitoes thatspread malaria, one of the diseases the foundation is fighting.” But why wouldn’t all charities have strong ethical investing policies and thereby limitsuch potential conflicts of interest? The answer usually is that there is a ‘hands-off’ approach between charities and their financial advisors. Charities often believe theyknow little about investing (though that is untrue of larger charities such as the Bill & Melinda Gates Foundation) and primarily want the highest returns possible on theirinvestments. Charity funds’ managers also seek the highest returns and so investtheir funds in the ways they believe make safe and good returns.Charities wanting to invest ethically and screen for environmental, social, andgovernance (ESG) issues, have to engage their investment consultants in thediscussion, as it is unlikely that their investment consultants will bring up the subjectthemselves.This is clear from a 2009 US study, “Investment Consultants and ResponsibleInvesting,” where researchers found that, “investment consultants are still cautiousabout raising ESG issues with their clients. Only 22 per cent said that they raise the

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