Introduction: Ethics Need More Than Good Intentions
For many charities and churches, ethical investment is a moral imperative. But good intentions aren’t enough. To turn values into action, you need a clear and comprehensive Ethical Investment Policy.
This guide walks charity trustees and finance teams through what to include in an ethical investment policy that is:
- Aligned with your mission
- Governed by charity law
- Practical to implement
- Transparent for donors, auditors, and your board
Whether you’re building your first policy or updating an old one, this is a framework you can build on.
Why an Ethical Investment Policy Matters
An ethical investment policy helps your charity:
- Avoid exposure to harmful industries
- Reflect your spiritual or social values
- Prevent reputational risk
- Guide decision-making and manager selection
- Satisfy regulators and internal governance
It also signals to stakeholders that you take stewardship seriously—and that your money is working for your mission.
Core Sections to Include
1. Introduction and Purpose
Explain the role of the policy and how it aligns with your charity’s:
- Mission and objectives
- Theological or ethical commitments
- Legal responsibilities as trustees
This sets the tone and makes your intentions clear.
2. Scope and Coverage
Define what the policy applies to:
- All invested assets?
- Endowments or only discretionary funds?
- Short-term cash as well as long-term investments?
Make clear whether it applies to pooled funds, discretionary portfolios, or segregated mandates.
3. Ethical Exclusions
State the activities or sectors you will not invest in. This could include:
- Fossil fuel extraction and coal mining
- Tobacco and adult entertainment
- Gambling and alcohol
- High-interest lending (e.g. payday loans)
- Weapons and military systems
- Companies violating human rights or labour standards
Use clear thresholds (e.g. “companies deriving more than 5% of revenue from…”)
4. Positive Investment Criteria
Highlight the types of businesses or sectors you wish to support. For example:
- Companies aligned with the UN SDGs
- Those with strong climate policies (e.g. Science-Based Targets)
- Organisations advancing access to healthcare, housing, or nutrition
- Businesses demonstrating fair wages and supply chain transparency
These reinforce your mission and help guide manager selection.
5. Theological and Faith-Based Foundations (if applicable)
Include references to:
- Relevant Church or denominational teaching
- Documents like Mensuram Bonam, Methodist JACEI guidance, or the Compendium of the Social Doctrine of the Church
- Scriptural principles such as stewardship (Genesis 2:15), justice (Micah 6:8), or integrity (Proverbs 11:3)
6. Shareholder Engagement and Voting
Set expectations around:
- Voting at company AGMs
- Engaging with companies on issues like climate, human rights, tax, and governance
- Escalation and divestment policies where engagement fails
Epworth provides regular engagement reports for client review.
7. Monitoring and Review
Clarify how the policy will be:
- Reviewed (e.g. annually by trustees)
- Evaluated for effectiveness
- Updated in response to new developments
Include who is responsible—e.g. finance committee, board of trustees, or investment sub-group.
8. Manager Accountability
Include language requiring:
- Fund managers to respect the policy
- Ethical performance reporting alongside financial returns
- Full transparency of holdings
- A clear process for raising concerns or switching managers if ethics are breached
Optional: Appendices or Schedules
Include supporting documents or references, such as:
- Your full Investment Policy Statement (IPS)
- List of applicable ethical standards (e.g. Access to Nutrition Index, CDP, etc.)
- Relevant denominational or organisational guidance
Common Pitfalls to Avoid
- Vague language – Be specific about what is and isn’t acceptable.
- Lack of accountability – Assign responsibility for oversight.
- Outdated criteria – Review regularly to stay aligned with evolving ethical standards.
- Overreliance on ESG – ESG is not the same as faith-driven ethics. Be clear on the difference.
How Epworth Supports Policy Development
We offer:
- Templates and drafting support
- Help aligning with your mission or denominational guidance
- Ethical screening tools and thresholds
- Full reporting to support trustee oversight and audit
We’re here to make policy development clear, confident, and rooted in your values.
Conclusion: Make Your Ethics Visible and Actionable
An ethical investment policy is more than a document. It’s a public expression of your principles—and a practical roadmap for trustees who want to honour their responsibilities with clarity and faithfulness.
Need help drafting or reviewing your policy? Our team would be happy to assist.
Contact us or explore our approach to ethical charity investing.