The Landscape of Philanthropy: Why ESG Matters for Charities
The landscape of philanthropy is evolving, and charities today are finding new ways to strengthen their impact. One approach gaining momentum is the integration of Environmental, Social, and Governance (ESG) principles into charitable operations.
From sustainability initiatives to ethical leadership, the ESG concept offers a framework that aligns with a charity’s mission while enhancing its long-term effectiveness. As this shift continues, organisations that embrace these principles are setting new standards in the nonprofit sector, redefining how they engage with communities, donors, and stakeholders.
In this blog, we look at why ESG matters for charities and how it can drive positive change.
What is ESG?
ESG is the acronym for Environmental, Social, and Governance, a framework used to determine an organisation’s business practices and how it fares on sustainability, social, and ethical issues.
Overview of ESG for Charities in Singapore
The Code of Governance for Charities and Institutions of a Public Character (IPCs) aims to provide board members with a framework to support them in acting in the charity’s best interests and enhance public confidence in the charity sector by establishing governing standards. This code was first introduced in 2007 and later revised in 2011 and 2017.
Here are some examples of how charities can relate to ESG principles:
| ESG Aspect | What it Involves | Examples |
|---|---|---|
| Environment | How their actions affect the environment | Climate risks and opportunities, waste, water, and energy management |
| Social | How they handle relationships with stakeholders | Volunteerism, philanthropy, workplace safety, well-being, and health, socially responsible business practices |
| Governance | How they govern themselves | Against bribery and corruption, executive compensation, board structure and diversity, risk management, and other similar internal processes |
Latest Amendments to the Code
In 2023, the code was revised to introduce the concept of ESG to the sector in Singapore. Under the revised code, which has been in effect since 1 January 2024, charities will be expected to implement ESG practices concerning how funds are raised and money is spent.
Larger charities are also expected to establish a 10-year board term limit, a requirement aimed at encouraging board renewal and succession planning. Charities must also enforce a maximum term limit of 10 consecutive years for all board members, with the option to re-elect members for subsequent terms.
Why Should Charities Consider ESG?
ESG has become mandatory for an organisation’s long-term growth and development. Charities are no exception, and those that embrace ESG principles and implement them into everyday business practices can lead to measurable benefits and opportunities, such as:
- Attracting ESG-Conscious Donors
- Enjoying ESG-Focused Grants
- Stronger Stakeholder & Community Engagement
- Future-Proofing and Ensuring Compliance
- Boost Collaborative Opportunities
Internal Benefits
- Operational Efficiency & Cost Savings
- Charities that embrace ESG principles can forge a mission-driven environment that retains talent in the long run. They can also handle the organisation’s workforce more effectively with enhanced social awareness and governance.
What Are the 4 Stages of ESG Maturity?
How does an organisation determine the extent to which it has considered and assimilated ESG topics into its business strategies, decision-making processes, and operations?
The level of integration frequently depends on a mix of factors, such as the charity’s size, resources, and leadership commitment. ESG maturity can generally be categorised into 4 stages:
| Stage | What it Means |
|---|---|
| Stage 1: Growth Mindset | The charity displays an understanding of the issues covered by ESG considerations. It makes an effort to enforce initial steps to establish an ESG framework. |
| Stage 2: Initiator | The charity has set up an ESG framework. It is in the midst of planning, adjusting, and applying principles of effective ESG management and supervision. |
| Stage 3: Integrator | The charity has assimilated ESG principles into its operations, executed |
| Stage 4: Trailblazer | The charity has obtained maturity in ESG and become a leader in the sector. It has a keen understanding of ESG risks and opportunities, and has practical plans to meet its goals while being supported by ESG disclosures. |
Embrace ESG and Start Your Journey With InCorp
In today’s world, ESG principles are no longer just a corporate responsibility – they are also becoming essential for charities and non-profits.
As donors, volunteers, and stakeholders increasingly seek transparency, ethical practices, and sustainability, charities that integrate ESG strategies can enhance their credibility, attract more funding, and create a more meaningful, lasting impact.
Contact our ESG team today to find out how you can kickstart your charity’s journey today!
FAQs about ESG for Charities and Institutions of a Public Character (IPC)
Q: What is a charity?
A: A charity is an organisation established for charitable purposes, such as education, poverty relief, health, or community welfare.
Q: What is an IPC?
A: An IPC is a charity that has been granted special status to receive tax-deductible donations.
Q: What is the purpose of the ESG framework?
A: It is a set of best practices designed to help charities and Institutions of a Public Character (IPCs) maintain high standards of governance, transparency, and accountability.
Q: Can you assist with a clear roadmap and professional support to implement ESG from start to end, maintaining compliance with the code?
A: Yes, we can.
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About the Author
Ruby Rouben
Ruby brings over 16 years of extensive experience in the audit field to the role, the majority of which was spent leading the internal audit and risk advisory engagements across publicly listed companies, institutions of higher learning, MNCs, statutory boards, ministries, and more.
In recent years, Ruby has focused on advancing sustainability consultancy services, leading internal evaluations of the sustainability reporting processes for publicly listed companies. This shift underscores Ruby’s commitment to enhancing corporate responsibility and environmental stewardship in the business landscape.
