Responsible investment guidance issued by the Charity Commission
The Charity Commission closed the consultation on 20th May 2021. Views were sought on the clarity of the revised guidance it has published about the approach to investing charity funds. While the Commission analyses the feedback provided, we share some background to the consultation.
All charities can invest, and for some charities, investments can be a major source of funding.
The Commission are keen to point out that it is the trustees who are responsible for how they invest their charity’s assets, not for the Commission to tell trustees what they should do. However, the Commission does provide guidance for trustees to help them understand and comply with the law.
The issue – was the previous guidance clear?
Trustees have always had the option to make financial investments in ways that align with their charity’s purpose (and values). Previously this was known as ‘ethical investment’, which the Commission have now termed ‘responsible investment’.
The examples given by the Commission are:
- Negative Screening – avoiding investing in investments which are against the charity’s aims (i.e. a health charity investing in products harmful to health)
- Positive Screening – choosing to invest in a sector which aligns with the charity’s aims (i.e. an environmental charity investing in renewal energy)
The Commission’s current guidance, ‘Charities and investment matters: a guide for trustees – ’CC14’, describes the legal framework, duties and discretions that trustees have when investing their charities’ funds. The lack of clarity and the reasons given included:
- That some trustees felt they are unable to make responsible investments, because they perceive they have an overriding legal duty to maximise the financial returns when investing, regardless of any other consideration
- That there is insufficient assurance that trustees can decide to take a responsible approach to investment
- A perception that the Commission does not accept that trustees can comply with their duties fully if they adopt a responsible investment approach
- That some felt that the guidance lacks practical advice