Some charities get income through grants from foundations or government. Foundations are charities whose main purpose is to fund other charities. They get their money from companies or wealthy individuals or long-term investments. Different foundations will have different focuses for their giving – some concentrate on medical research and others on the environment, for example.
A relatively small number of charities have endowments – a large sum of money which the charity spends over a long period, or spends only the interest from. Donations by wealthy philanthropists as far back as several hundred years ago are still earning interest and supporting the work of many charities.
In general, charities try to maximise the financial returns from their investments, in either the short or long term. This means they have more money to spend on their work.
Charities can choose to invest ethically in return for a lower level of investment return if they have a particular reason for avoiding a company or type of business. This is normally if investing in that area would be in conflict with their aims or principles or might risk damaging their reputation. However there’s no obligation for charities to do this – it’s up to their trustees to decide.