Environment, Social and Governance (ESG) considerations have increasingly become a focus for investors when evaluating companies to invest in. Investors want to be sure that companies are aware of the material risks they face in these three areas. ESG investment now represents some $23 trillion globally.
How do ESG issues apply when assessing charities?
Not being dissimilar to investing, donors and stakeholders want to be confident that the Governance of the charity is strong. Governance is consistently the greatest concern for these groups as it reflects the overall management of a charity. There have been too many cases where governance of a charity has been sub-par, leading to anger from donors, embarrassment from other stakeholders, Australian Charities and Not-for-profits Commission (ACNC) action, and eventual closure of the charity.
Equally, charities have a social purpose at their core, so the S part of ESG is critical for these organisations. That Social purpose may range from education, healthcare, research, ageing, animal welfare, spiritual needs, through to care for the environment. Donors and stakeholders want to be sure that the impact from the charity is strong, as well as gaining an understanding of how that compares to other similar charities.
At The Impact Suite, our whole mission for assessing and comparing charities came from a focus on ESG. We want to be sure that stakeholders can assess charities more transparently, their Governance, their Impact or Social Purpose, and including those with an Environmental purpose.
Our tools assess Governance through many lens. We have researched and developed our own proprietary factors which are based on the 5 petals of the Lotus Matrix. These key factors look at the Charitible Purpose of the organisation, its People, their Processes, measureable Impact, and consistent Review. We then combine these to form a Lotus Rating for the organisation.