We invest in order to finance our charitable work. We use a range of sustainable investment approaches with different financial and impact goals to support our work.
Our total annual budget for grant-making is around £40m to £50m, which is spent towards our strategic aims and priorities. This includes funding organisations advocating for systemic change in the investment system as well as support to secure more money for nature's recovery.
Our Board of Trustees regularly review our funding budget - balancing the need now with the likely need in future. Our budget is linked to the value of our endowment; we spend around 4% on grants and operational costs. To account for volatility in the market, we calculate the 4% based on the performance of our investments over the previous five years.
We have a £45m allocation for social investments, where our approach is impact-first, and financial returns are secondary. We use social investment to support our strategic aims and priorities whilst also supporting the development of the social investment market. This includes investing in new, innovative and alternative social and environmental models, such as a Land Purchase Facility and quasi equity products.
Together with Environmental Funders Network, we also have an Environmental Finance and Learning Fund, which supports environmental initiatives needing early stage, high risk repayable finance, alongside a learning programme for investors interested in investing for environmental impact.
We have a £10m allocation for impact investing, which we use to test the potential to achieve market-like returns by investing into impact funds that align with our aims, and which generate a measurable impact.
In 2022, we made our first impact investment to a fund investing into companies which deliver solutions for more sustainable, healthy and ethical consumption.
Enhanced sustainability funds
5% of our investment portfolio is allocated for funds looking to achieve enhanced environmental, social and governance impact alongside a market rate return. We use it to invest in funds that wouldn't normally make it into our main investment portfolio due to their small size, focus or risk profile.
Main investment portfolio
We work with our advisors to identify funds which focus on sustainable investing and have steadily increased the proportion we would classify as best-in class managers. As well as targeting net zero carbon in the portfolio by 2040, our Trustees have now agreed a sustainable approach across the whole portfolio.
Since 2016, we have been involved in a number of collaborations, with other investors, looking for opportunities to influence and promote corporate behaviour, which aligns with our strategic priorities, and is in the interests of long-term shareholders. In 2022, this included an initiative encouraging companies in the food sector to reduce environmental risks associated with manufacturing facilities and a joint letter to European banks asking them to end funding for fossil fuel projects.