Socially responsible investing and charitable giving

Lorna Brown is a solicitor in Shepherd and Wedderburn’s Private Client team.

As awareness grows of the complex nature of the world we live in, people have a genuine desire to help drive positive social change, writes Lorna Brown.

This is reflected in a number of emerging trends, particularly in the areas of investment and charitable giving. Socially responsible investment (SRI), also known as ‘ethical’ or ‘sustainable’ investment, has developed significantly over the past 30 years. Environmental, social and governance (ESG) considerations have become increasingly important, and we can perhaps point to high-profile issues such as climate change as the catalyst for this shift in investment objectives.

SRI has become much more accessible, particularly given the introduction of ethical investment stock market indices, such as the FTSE4Good, which measures the performance of companies demonstrating sound ESG practices. Investment managers have also established dedicated ethical and sustainable investment teams that focus on building resilient portfolios taking into account ESG considerations. There is certainly momentum behind the movement to bring about positive change through investment, and so a shift in investment strategy is likely to have a positive impact both in terms of investor satisfaction and financial returns, based on a recognition that sustainable companies will do better in the longer term.

Philanthropic giving has also gained traction as a result of a combination of factors, including the evolution of technology and social media, increased awareness of good causes and new channels for donations, such as the online platform JustGiving. While the principal driver for those who undertake charitable giving lies in making a positive contribution to society, there is also the added bonus of attractive tax benefits.

For instance, donations to a charity may qualify for Gift Aid, which allows UK charities to claim back the basic-rate tax already paid on donations by the donor, and allows the donor to claim back any tax paid at the higher rate. Charitable donations are also taken into account in the context of Inheritance tax (IHT) planning, on the basis that charitable bequests are exempt from IHT. With careful tax planning, the effective rate of IHT can be reduced from 40% to 36%, provided that at least 10% of the net estate is left to charity. We regularly advise our clients on how to be more strategic in the charitable donations they make, and we collaborate with other advisers to help clients realise their philanthropic ambitions.

Lorna Brown is a solicitor in Shepherd and Wedderburn’s Private Client team. For more information, contact Lorna on 0141 566 8574 or at lorna.brown@shepwedd.com


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