An inconvenient youth

There are options for charity investors to find more values-aligned investment service providers to manage their money.

Nine applications came from certified B Corp organisations, meaning they meet verified standards of good sustainability practice in their own operations. Another two were closely related to B Corps, for example one of the non-lead applicants in a partner application was a certified B Corp. Of the shortlisted applicants, Tribe Impact Capital has a particularly high “B Impact Score.” 

Another related area of potential alignment with values-based investors, or lack thereof, is the governance and ownership structures of ISPs. A subjective analysis of the ownership structures and governance of the 55 lead applicants suggested that:

• 7 ISPs had an ownership and governance structure that was highly aligned with charities, as demonstrated by preventing external profit extraction and prioritising values over commercial returns. These included employee-owned ISPs, those with charity ownership, or founder-led models with philanthropic backing. In each case, governance protections ensured no commercial shareholder could override mission. Tribe Impact Capital and EdenTree Investment Management were two ISPs judged to have a high level of alignment. 

• 12 ISPs had an ownership and governance structure with medium alignment with charities. These firms often also had models that avoided external shareholder pressure, such as ownership through partners/employees. However, it was often less clear how evenly distributed this ownership was. Several were subsidiaries of values-led parent companies and some had governance protections for values. But the practicalities of this structure on day-to-day operations was less clear. 

• 12 had an ownership and governance structure with low, but some, alignment with charities. Some had employee or partner ownership, with significant but minority stakes within predominantly commercial structures. In most cases, employee ownership appeared concentrated among senior management rather than broadly distributed. Some were subsidiaries of large mutual insurers, offering potential values alignment but limited direct control. 

• 24 did not seem to have any clear alignment with charities. None of these ISPs were shortlisted. 

We also saw a trend that the better performing ISP applicants were more likely to be geared entirely towards impact or sustainable investment. All five shortlisted ISPs fit this category. This was a change from 2020 when more mainstream ISPs were also shortlisted.

The conclusion for charities and other values-aligned asset owners is they do not need to settle with the general status quo of investing with ISPs that are not aligned, even at the organisational level.

Importantly, as investment fees are a significant part of charitable foundation expenditure, charity investors do have a broader pool of values-aligned ISPs to select from.