On 15 November 2022, the Charity Commission published an update on its investment guidance following the Butler-Sloss case, which concluded earlier this year.
The Commission explained that it supports the following principles included in the case judgement:
- Trustees are required to formulate an appropriate investment policy that is in the best interest of the charity and its purposes.
- Whilst trustees normally use investments to further a charity’s purposes by maximising the financial return, trustees should also consider the risk level and the suitability of the investments in the context of the charity’s objects. This could include considering the impact of reputational factors and how donors or beneficiaries may view their investment decisions.
- If trustees believe that certain investments conflict with their charitable purposes, they are able to exclude such investments from their portfolio.
- Social investments or impact or programme-related investments are made using separate powers rather than the pure power of investment.
- Those trustees who appropriately balance relevant factors and adopt a reasonable and proportionate investment policy, will have complied with their duties, even if the court or other trustees might have come to a different conclusion
The Commission explained that it is satisfied that the above principles are reflected in their existing guidance – “Charities and investment matters: a guide for trustees (CC14)”. It will, nonetheless, be updating and redesigning its guidance. A key aim of the update is to ensure that the guidance is accessible and easy to follow for trustees. The Commission expects its final guidance to be published by Summer 2023
Kathryn Belton, Senior Manager in our Charities and Not-for-Profit Team commented:
“The outcome of the Butler-Sloss case confirmed that there is no single ‘right’ investment policy. It is for trustees to determine what is in the best interests of their charity including consideration of ethical or moral considerations where appropriate. We appreciate that many trustees are not investment experts. We hope that the updated guidance from the Commission will help them to effectively navigate this challenging and important area.”
The full text of the update can be found here.
