Article last updated 26 October 2026.
Faced with a combination of evolving return objectives and a shifting macroeconomic backdrop, senior charity executives are increasingly favouring active fund management. The survey, which questioned charity leaders managing a collective £5 billion of equity investments, shows that boards are fiercely maintaining their ethical standards.
Rather than diluting their values during tough times, charities are pursuing a strategic realignment - embracing active management and alternative asset classes while simultaneously strengthening their Environmental, Social, and Governance (ESG) frameworks.
Resisting the pressure to relax ESG policies
The research highlights a significant tension at the heart of modern charity governance. More than three-quarters of charity executives (76%) report coming under intense pressure to relax their ESG policies to deliver higher returns required to sustain frontline services.
Despite this, the sector is resisting the ESG backlash. Nearly nine out of 10 executives (86%) state that it is vital for investments to hold strong ESG credentials, and 89% believe the importance of ESG will increase over the next three years. Rather than treating responsible investment as a regulatory box-ticking exercise, boards view it as a core component of their mission to align investment with the communities they support.
The ESG commitment is driving policy changes:
- Tougher exclusions: Two out of three charities (67%) plan to make their investment exclusion lists stricter over the next two years, while only 27% expect them to loosen.
- The rise of 'Social' (S): The focus within ESG is pivoting toward the "Social" dimension. Over the next two years, 87% of charities expect to increase their focus on social investments, outstripping projected increases in Environmental (73%) and Governance (79%) asset allocations.
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Higher standard for advisers: 85% of leaders view an investment adviser firm’s ESG credentials as important during selection, and 97% expect this requirement to grow in importance over the next three years. Just 26% are currently concerned about their adviser's ability to meet ESG standards, down dramatically from 59% in 2025**.
The Parallel Migration to Active Management
At the same time, our research shows that charities are moving away from rigid passive tracking. Nearly three-quarters (71%) say allocations to active strategies from their investment portfolios will increase over the next three years, with 11% predicting a dramatic increase.
Currently, charities questioned hold an average of 40% of their portfolios in active strategies. Around a fifth (22%) have between 50% and 75% of their portfolios in active strategies. Key reasons driving the shift include the potential for stronger returns, increased transparency among active managers and the role active strategies can play in helping charities manage volatility, according to the research. Nearly seven out of 10 (69%) cited the potential for stronger returns driven by the technological and data revolution, which is equipping active manager with greater insight, as one of their three main reasons for increasing allocations.
A reassessment of asset class allocation
The switch to active is occurring alongside an increase in risk tolerance born of operational necessity. More than half of those surveyed (53%) report their risk appetite has grown over the past two years, and 63% expect it to increase further. To generate stronger real returns and improve diversification, boards are looking beyond public markets.
- Private markets and alternatives: Private equity has seen the most dramatic surge, with 89% of charities boosting allocations over the last two years and 98% planning further increases by 2028. A similar trend is evident in hedge funds and real estate, where 86% have increased exposure.
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Equities and renewables: UK equities remain foundational, held by 99% of respondents with an average portfolio weighting of 20%. Meanwhile, sustainability goals are actively driving asset selection, with 72% increasing allocations to renewables.
Balancing values with value
Charities are very much committed to delivering on their values, and ESG investing is central to that as demonstrated by their plans to toughen up exclusion lists and to work with investment advisers that can meet their ethical standards. It is not a regulatory box-ticking issue for charities but central to their mission and purpose.
For trustee boards, active management provides the granular oversight required to successfully navigate this dual mandate. Rather than settling for a compromise between performance and purpose, leading charities are proving that structural financial resilience is best achieved when investments remain fiercely aligned with organisational values.
Research
*Research was commissioned by Rathbones Group, via independent research agency PureProfile, to interview 100 senior charity executives, including board directors, finance directors, investment managers and investment directors during July 2026
** Research was commissioned by Rathbones Group, via independent research agency PureProfile, to interview 100 senior charity executives, including board directors, finance directors, investment managers and investment directors during September 2025.