Responsible investment for maximum impact

If the Lister Institute’s financial strategy is the engine that powers its mission, then responsible investment is the compass that guides its journey. Behind every decision to fund a prize or support a Summer Studentship, there is a careful balance – one that weighs ethical considerations, scientific ambition, and the need to steward resources for future generations.

This article is the second part in our series exploring the Lister Institute's investments and finance strategy.

Setting the course: Ethics at the heart of investment

The story of the Lister Institute’s approach to responsible investment begins with a simple but powerful principle: science is all about evidence, and so is our stewardship.

As Stephen McMahon, CEO of ARC Group and a member of our Finance and Investment Committee, puts it, “We seek to appropriately limit our investment activities so that we do no harm, but we have to back our constraints with scientific evidence. The Lister is a community of phenomenal scientists who scrutinse data and evidence every day. They ensure that we bring this same rigour to our finances and investments. The scientific members of the committee are scrupulous in that scrutiny. ‘The investment management community cannot just make statements about what is and isn’t environmentally friendly, for instance, and just expect us to accept them,’ they tell me. That would be at odds with how they operate in their day jobs, so they bring the same level of analysis to our investment decisions.”

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The Lister is a community of phenomenal scientists who scrutinse data and evidence every day. They ensure that we bring this same rigour to our finances and investments.

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Stephen McMahon, member of our Finance and Investment Committee

This evidence-based ethos shapes a policy that balances due consideration with flexibility. After all, financial trends shift. We all know investments can go down as well as up, so the Committee and the Institute's appointed finance and investment partners thoughtfully monitor and respond to opportunities and risks over medium to longer timescales. You only have to look at the defence sector to see how political and public opinion has clearly shifted with regards to nations arming themselves against aggressors, and the investment opportunity that this presents.

This is just one example of the environmental, social and governance (ESG) considerations that shape the Institute’s portfolio of investments. While ultimately implemented by a panel of underlying investment managers, the Institute's ESG policy is not overly prescriptive, due to the high degree of subjectivity and limited strength of robust evidence around many ESG dimensions. “The main guardrail is about the Lister’s exposure to tobacco. The evidence of harms from smoking is so strong that the Institute has no direct investments or holdings in tobacco companies,” explains Daisy Franklin, a portfolio director at Cazenove. Beyond this, the Lister’s approach is pragmatic, seeking to minimise exposure to sectors that conflict with its values and mission, while ensuring that investment decisions remain grounded in evidence and the realities of the financial world. So-called ESG ‘red flags’, for instance, are also monitored and reported in line with the governance of specific funds and the investment management firms’ corporate policies. At present, less than 5% of Lister’s investments portfolio are held in assets that could be regarded by some as ESG-sensitive.

As Murray Legg, Chair of the Finance and Investment Committee, notes, “We take an evidence-informed position. It’s not an extreme position with a long list of dos and donts, we’re trying to be sensibly in the middle.”

Stewardship in practice: Collaboration and adaptation

Murray stresses that responsible investment is not a static policy – it is a living conversation, shaped by ongoing dialogue between the committee and its investment managers. “Every five years, the committee undertakes a major review,” he says, “asking not only whether we are working with the right managers, but whether our overall strategy, including on ESG investing, remains fit for purpose in a changing world. We monitor economic events and political events that impact the world we all live in.” This collaborative approach also involves regular engagement with fund managers, who report annually on ESG positioning and the social impacts of investments, ranging from climate change, diversity in clinical trials, and human rights. Cazenove, for example, have an engagement framework with six priority themes which help ensure that the Lister’s investments are not only financially sound, but also aligned with broader societal goals.

Funding science, supporting community

Driving the Lister’s responsible investment policy is its commitment to maximise impact for the scientific community. Ultimately, the returns from the Lister’s investments fund the annual Lister Prize, the Summer Studentships scheme, and the daily operations of the organisation. There’s always a balancing act: when investment growth is high, decisions to fund more Prizes, or increase their value, are balanced with having to keep up with inflation or weather possible market falls. The ambition to sustainably support great science is always tempered with prudence.

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Maximising investment growth is not always the primary goal. And that’s manifesting itself today, particularly by increasing the number of annual prizes to eight and upping the prize fund to £300,000. We are fulfilling our mission and giving back to the scientific community._”

Murray Legg, chair of the Finance and Investment Committee

As Murray points out, prudence doesn’t simply mean maintaining the real value of Lister’s assets. “Maximising investment growth is not always the primary goal. And that’s manifesting itself today, particularly by increasing the number of annual prizes to eight and upping the prize fund to £300,000. We had excellent financial returns in 2024 and we’re not just locking them away. We are fulfilling our mission and giving back to the scientific community.”

“Our strategy is shaped to ensure the Lister remains active and sustainable for the long term,” adds Steve. “We have the comfort of a good capital base. That means we’re in a wonderful position of strength to explore the boundaries of what works and the tensions that trade-offs inevitably bring. This tension is not a source of conflict, but of creativity – a space where the committee can challenge itself to do more – to support more scientists, or try different things, and to respond to the evolving needs of biomedical research within the bounds of consistent ethics.”

Navigating complexity: Governance and transparency

There’s also a story of good governance and transparency to tell that goes way beyond investment policy. “The Governing Body spends, to my mind, an amazing amount of time being concerned about the gender balance of its community and other factors of diversity, both with regards to our own governance structures and the recipients of our awards,” observes Steve. “That alone, I think, is a better example of our keen desire to be responsible stewards of capital than anything that we articulate in dense investment policies. The Lister community passionately wants to support its scientists to be their best. That’s what really drives us to invest carefully and responsibly.”

The committee also plays an active role in building relationships with its investment managers and auditors. It assures a robust back office and keeps a keen eye on emerging risks such as cyber security. “These are all critical to smooth, efficient operations and our survival,” says Murray. “You can’t just put money in funds and not think about the security of our own records, IT systems, and minimising a risk of a hack. Cybersecurity has moved higher up the agenda over the last couple of years. It can’t be ignored and is an important financial risk we have to consider.”

A dynamic balance

Responsible investment is about maintaining a dynamic balance – between ethics and growth, prudence and ambition, tradition and innovation – to ensure that the Lister’s resources are stewarded wisely and its mission is fulfilled.

Even in today’s geopolitical turmoil and environmental and climate decline, one thing remains constant: our commitment to responsible investment, transparent governance and the pursuit of scientific excellence.

“We’re setting a course which gives us a bit of freedom and flexibility to do a little bit more,” Murray explains. “We’ve got a lower risk “all weather” fund so even if our main funds don’t keep up with inflation for a while or investment liquidity becomes difficult, we are in a sustainable position. And that means we can continue to support the outstanding science that the Lister is known for.”