Over the summer it has been interesting to see how the public has reacted to the Wonga scandal that the Church of England found itself in, and has made me think about how we can avoid exposure to Wonga-type scenarios. 

As a reminder the Church found that it had, through an indirect holding, 0.001% of the £5.1 billion in Wonga, one of the payday loan providers preying on the most vulnerable in society.  The aspects of this which I found most interesting were: 

1)      it showed that ignorance of any potentially embarrassing holding is not a defence, and frankly never should be

2)      the reality is that any organisation is likely to have a similar issue if it holds funds that are in a pooled vehicle and

3)      clearly we shouldn’t rely upon our investment managers to flag up Wonga-type issues within your portfolios.

Dealing with the issues above must be on the agenda of all organisations.  I know that we address this with all our clients, but how and where do you start? 

Ignorance is not a defence.  It’s so important for organisations to understand what they hold in their portfolio, the rationale for it being there and, if it is there, what they should do about it.  More easily said than done in some cases! 

Face value of your holdings is no longer going to cut it – you will need to delve into the types of companies and into the detail of what they do.  Your advisor, working with organisations such as Ethical Screening, can help you. 

So, 0.001% is the new threshold for not holding any taboo stock, bond or other investment vehicle.  (Let’s face it you’ve probably already breached this threshold now, in the past and most likely into the future without even knowing it!) 

To deal with this one, every organisation needs to make a decision about its own acceptable and realistic levels of indirect holdings, and set specific constraints.  By this I mean you need to set a limit that can be monitored, managed and revised in relation to global events that unfold over time.  This last one is by far the hardest, especially when you have purchased a fund with ethical constraints, which on the face of it meet or exceed your own requirements.  The reality is that you will need to revisit those constraints and probe them to understand what they really mean.  

Over the summer we have been doing this with our clients’ investment managers, and have found some interesting results.  In our discussions a) our clients were surprised at the detailed information about their holdings and b) the investment managers had not thought laterally and considered the implications of the Wonga scenario to the portfolios. 

With the escalating tensions in Syria, the Middle East and other parts of the world ruled by despots, all organisations with an ethical policy mentioning armaments must revisit, review and almost certainly make changes to their holdings or the way they have invested. 

 Otherwise be prepared to be Wonga’d in the press!