Commission aims to make “responsible investing” easier for charities

The Commission has recently published a blog post setting out that it has decided to try to understand what is holding charities back from making responsible investments in line with their purposes, and to give more charities confidence to make such investments.

Guidance for charities in relation to investment is currently found in the Commission’s guidance “Charities and investment matters: a guide for trustees”, and its interim guidance on social investment.

The present guidance explains that the law allows charities to decide to invest ethically, with an ethical investment being defined in the guidance as “a way of making financial investments which takes into account the charity’s values and ethos”, even if this means a lower rate of return on the ethical investment compared to an alternative, when:

  • a particular investment conflicts with the charitable aims of the charity
  • the charity might lose supporters or beneficiaries if it does not invest ethically or
  • there is no significant financial detriment.

Therefore, the guidance also contains the Commission’s recommendation that charity trustees should: “decide whether to adopt an ethical, socially responsible or mission related approach to investment and ensure that it can be justified”.

The Commission has explained in its blog post that “responsible investment” as “demonstrating that you have thought about your charity’s purpose as well as your investment duties when making investment decisions”, and that it has determined that it is time to address this issue as a result of two developments – a shift in public expectations of charities when it comes to investing, and the fact that it is increasingly prudent for charity trustees to consider “factors affecting the longer term financial sustainability of their investments”.

The Commission therefore wants to hear from charity trustees, charity investment managers, employees or anyone else with an interest about:

  • their experiences of and current considerations around responsible investing,
  • the perceived barriers to responsible investing, and
  • what more could be done to support trustees to invest in line with their charities purpose and values.

The Commission will be seeking views, by email, until 31 March 2020.

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