Becoming a more responsible investor

Why is how the Health Foundation's endowment invested so important? 

Aidan: Well, the endowment is the financial engine of the Health Foundation. It is the principal source of income – our operational costs and the grants we make are funded by the returns generated from investing that pot of money.  

As an investments team we look at everything through a twin lens, balancing the need for financial return against our desire to be a responsible investor and asset owner. The Health Foundation is quite a small body in the greater scheme of the financial world. But that doesn’t mean we’re not important and that our investment decisions can’t influence real-world impact and support the transition to a more sustainable economy.  

What guides how decisions about investment are made?  

Aidan: Responsible investing is also referred to as ESG investing, which involves considering environmental, social and governance factors when deciding how to invest sustainably.  

We’ve put a lot of thought into what it means to be a truly responsible investor at the Health Foundation. For us it begins with knowing what the Foundation owns and being able to be transparent about where the money is going. To do that properly we have to push for transparency and actively engage with everyone we work with.  

Jo: In 2020 we formalised our ambition to be a more responsible investor in our ‘statement of investment principles’. That gives us a clear governance structure and incorporates four responsible investment guiding principles, which align with the Health Foundation’s four mission values: independence, collaboration, evidence-based approaches, and constructive challenge. More recently we have formalised the framework for implementing responsible investment across the portfolio via three distinct actions: oversight, stewardship and collaboration. 

Key to our approach is adopting the role of ‘considered advocate’ with both our selected investment partners and through them the companies we invest in. This engagement approach supports our ambition to reach net zero in our investments by 2035 and increase the impact of our investments against the UN’s Sustainable Development Goals relating to health and wellbeing and climate action.  

How do we go about managing such a large amount of money?  

Aidan: We run an outsourced model of investment. The investment team is deliberately small and works alongside some important external partners. Our principal investment consultant, Redington, act as our main route to market. We chose them because of their credibility and expertise in responsible investment. 

Jo: A large proportion of our endowment is invested through public equity funds, which are managed by investment managers. Last year we went through an extensive process to reassess which managers would appropriately align with our guiding principles, and we now have a trusted group of six. We don’t directly tell our investment managers what to invest in, but we’ve chosen them based on their shared values and principles for responsible investment and sustainability. We also engage with them to understand how investment decisions are made, what they own and to ensure they're driving better business behaviour within those companies.  

Where does the Health Foundation currently invest? 

Jo: Through our investment managers we are shareholders in 177 global companies, many more if you look at our private portfolio as well. It’s really varied, ranging from shares in UK household names to investments in sustainable farming infrastructure.  

Aidan: There are so many interesting examples. Did you know we are an investor in Auntie, a leading provider of digital B2B preventative mental health services based in Finland? Or Sykes Cottages, a leading holiday accommodation provider in the UK. And via the Glennmont Clean Energy III fund, we invest in a Europe-wide portfolio of solar and wind farms for clean energy generation. 

How does investing responsibly help to further the aims of the Health Foundation?  

Aidan: We want to have a positive influence on the companies we invest in to help meet the Foundation’s goals for health and sustainability. Companies have an impact on health, directly through their workforce and customers, and indirectly via their environmental footprint and communities they operate in. Because we can speak to our investment managers in detail about the things that make a difference to health, we can give them ideas for lines of questioning and challenge to take to the investee companies, so they can input in a more tangible way. 

How else is the Health Foundation collaborating around responsible investing?  

Jo: We’re involved in a range of investor initiatives. For example, through ShareAction’s Healthy Markets Investor Coalition we’re pushing the food producers and retailers held in our portfolio (such as Unilever and Nestlé) to improve their public reporting and make their food healthier. We’re also members of a recently formed Investor Coalition on UK Food Policy, an initiative engaging policymakers with recommendations for how large food businesses should report on healthy and sustainable food sales. 

And we’re members of the Charities Responsible Investment Network, a peer network collaborating on topics including decarbonisation and diversity, equity and inclusion. 

What's the long-term vision for investment at the Health Foundation? 

Jo: We’ve set a really important target to be carbon neutral in our investments by 2035. Changing our investment managers at the start of this year was a big part of making that happen, and we’re already working actively with our new managers to look at decarbonisation pathways. Our interim target is to halve carbon emissions from our public equity portfolio by 2028.  

Transparency is key. Over the coming months we’re going to be publishing more information about our portfolio. And by next year we hope to be able to share details of our progress to become carbon neutral.  

Aidan: We’ve made some great leaps forward over the last 3 years in becoming a more responsible investor. It’s a big complex task ahead. But I think of it as building a wall, brick by brick. And each brick is meaningful.  

This content originally featured in our email newsletter, which explores perspectives and expert opinion on a different health or health care topic each month.