A recent study by Charity Times shows that reputational risk poses the biggest threat to charities over the next five years, with funding remaining the largest concern in the short term. In some cases, charities feel no choice but to sacrifice one for the other, a decision that is often very difficult and, as seen in 2019, widely disputed and publicised. This was felt most strongly by the creative sector which saw a rise in withdrawn funding, often due to wider concerns around the environmental or social impact caused by their sponsors.
Certainly, funding is at the heart of every charitable organisation and without it, most charities, particularly ones without an endowment, would not function. However, it is right to consider the long-term ramifications of partnering with an organisation if it conflicts with your charity’s mission. This is particularly prevalent for the creative sector, which relies on continued support and engagement from the public. Exhibitions and artworks that raise awareness around societal issues are also at risk of being compromised if the finance supporting it is unethical.
Earlier this year The National Gallery took the difficult decision to turn down a major donation from their longstanding supporter, the Sackler family, due to the controversy linked to the pharmaceutical company Purdue Pharma and the associated opioid crisis. This was shortly followed by the Royal Shakespeare Company announcing the end of their sponsorship deal with BP amid a growing opposition to fossil fuel companies’ sponsorship of the arts. Similarly boycotting BP, The Scottish National Portrait Gallery decided to withdraw their popular BP Portrait Award exhibition from 2020. With these bold decisions brings an inevitable issue; how can creative charities seek new funding? There is clearly now an opportunity, and a great need, for organisations that are setting the standard, and making positive contributions to both people and planet, to step in and close the funding gaps their peers have left behind.
Similarly to The National Gallery, stepping away from its associations with the opioid crisis, EdenTree will not support companies such as Johnson & Johnson, once an ESG posterchild stock, now tarnished given its involvement in the same epidemic.
It is clear that charities are becoming increasingly aware of the corporations they are associated with; whether that be through funding partnerships or the holdings in their investment portfolio. We are pleased that, as responsible and sustainable investment managers, we can offer a solution that addresses concerns around reputational risk and financial support, without asking investors to pick which is most important to them. With an ethical policy and portfolio, creative charities can partner with corporations that protect, rather than tarnish, their reputation. There is also proof that returns in this space continue to be positive and often can be superior to non-screened funds.
Similarly to The National Gallery, stepping away from its associations with the opioid crisis, EdenTree will not support companies such as Johnson & Johnson, once an ESG posterchild stock, now tarnished given its involvement in the same epidemic. Investing in such a business is not only damaging to a charity’s reputation but it can also have financial consequences in the form of reduced firm sales, fines and legal costs that could impact on shareholder return. Where we are fortunate as investors, however, is that there are plenty of other high yielding responsible investment opportunities out there. The case is perhaps less straightforward for creative organisations that rely on funding from one corporation to support ongoing exhibitions and projects. Therefore, finding new donors will likely be a priority for many creative arts charities this year.
As investors that actively vote and engage with organisations as part of our ‘Amity’ screening process, to encourage improved corporate practice, we hope that these public proclamations of discontentment will similarly encourage ‘bad’ organisations to do better. We are proud that with our thirty years of experience and in-house expertise for investing globally we are able to protect our client’s reputation whilst delivering ‘profits with principles’ on their investments.