Ian Burrows: CC14 investment guidance

13 Feb 2024 Expert insight

Are the new rules for charities a help or a hindrance to impact investment, asks Ian Burrows.

This content has been supplied by a commercial partner.

The new Charity Commission guidance on investments has been a long time coming. It was way back in January 2020 that the Charity Commission first launched a listening exercise to help understand the barriers that may have been holding some charities back from ethical or responsible investment. In some ways therefore, it may be surprising that it was not until August of this year that the Commission was finally able to launch its redrafted CC14 guidance on investments for charities. A lot has, of course, changed in the intervening period. The pandemic can be blamed for part of the delay but the launch of proceedings in the High Court by two charities was, inevitably, the more important factor.

Butler-Sloss case

Brought by trustees of the Ashden Trust (now known as the Aurora Trust) and the Mark Leonard Trust, the case sought clarity on trustees’ ability to invest in a climate conscious fashion, even if it might be detrimental to financial returns. Heard by Justice Green, who gave his ruling in May 2022 year, it is fair to say that there is some difference of opinion as to importance of the judgment.

For some, it is a useful restatement of the existing law, which dates back to the Bishop of Oxford case of 1992, but which doesn’t change things materially. For others however, there are important nuances in the judgment that will prove helpful for those trustees interested in pursuing ethical or responsible investment policies and perhaps even impact investment.

The common theme of both judgments is that trustees should exercise their power to invest to further the charity’s purpose and that a charity’s purposes are usually best served by seeking to obtain the maximum return on investment. The differences are in what comes next. In the original Bishop of Oxford case, it was thought that only in comparatively rare cases would trustees be justified in departing from this principle. These were where there was a straightforward and direct conflict between an investment and a charity’s purposes and where divestment was unlikely to result in financial detriment, eg a cancer charity divesting from tobacco.

The Butler-Sloss judgment meanwhile takes a broader approach. Justice Green held that where trustees are of the reasonable view that a particular investment potentially conflicts with a charity’s purpose the trustees have discretion to exclude such investment. This is even where this would cause a reduction in the anticipated financial return. It is up to trustees to balance the competing factors such as the severity of any potential conflicts and any financial implications including any potential impact on the charity’s reputation or the support it receives.

While the judgment is concerned exclusively with negative screening, as a judge can only decide questions which have been asked, it is thought that the principles which have been established are helpful for those interested in other forms of responsible investment. In particular, these include the principle that trustees have discretion to adopt whichever investment strategy they decide is best suited to fulfilling their charity’s purpose.

Charity Commission guidance

Indeed, the revised Charity Commission guidance on investments, known as CC14, appears to be much more permissive. It helpfully now includes specific reference to incorporating environmental, social and governance (ESG) factors into investment decisions as well as using active stewardship and engagement as examples of approaches which trustees might consider.

This is significant as while the Charity Commission doesn’t have the power to make the law, as the regulator of the sector it is the most likely body to bring proceedings for any alleged breaches of the law. It would thus seem unlikely for it to bring proceedings against a charity for following the guidance which it itself has set.

What is missing from the new guidance, however, is any explicit mention of the term impact investment. This was apparently by design, at least in regard to the terminology. From people who were close to the Commission’s thinking, we understand there was fear that inclusion of the term could lead to confusion with the concept of impact measurement, itself a big issue in the charity sector.

Social investment

This is not to say that the guidance is silent on the broader concept. Instead, the guidance describes a method of investment which seeks to achieve a charity’s purpose directly through an investment ie create impact, and make a financial return. This is termed social investment and the guidance helpfully gives examples which would chime with many people's understanding of impact investment eg a development charity making loans to small-scale farming businesses.

One potentially limiting factor is the requirement to link the impact created to a charity’s purpose. This is unlikely to create an issue for a charity with a very broad purpose, eg for such charitable objects as the trustees shall from time to time think fit. It may, however, limit the range of social/impact investments for those with more narrowly defined purposes. Could a healthcare charity, for example, justify making that investment in loans to small-scale farming businesses. The guidance is silent on how strong, or otherwise, a link must be and hence this will be for trustees to judge and potentially defend, if challenged in future.

That is of course unless trustees choose another option. The guidance distinguishes between financial investment (including negative screening, ESG etc) and social investment, principally because these two types are defined and regulated by separate Acts of Parliament. There could, however, be a grey area between them where one investment could be treated as either financial or social depending on the intent of the trustees. Indeed, the list of examples of financial investment in the guidance is described as non-exclusive, potentially leaving the door open for other forms of investment under that category.


The new rules and guidance around charity investment may have taken time to arrive, but they do appear to be helpful for those seeking to link their investments more closely to their purpose. Those seeking to extend the range of negative exclusions or to incorporate ESG strategies will be more comfortable as such strategies are explicitly described in the guidance. Those interested in impact investment may however need to give the matter some additional thought and potentially seek extra advice.

Ian Burrows is senior investment director at Investec Wealth & Investment (UK)

Charity Finance wishes to thank Investec for its support with this article 

The Charity Finance Yearbook is the ultimate reference source for charity finance professionals. Produced by the Charity Finance editorial and research team it includes updates, advice and trends on accounting and audit, VAT and taxation, investment strategy, responsible investment and finance, risk, funding, performance and governance, law and regulation, HR and pensions, IT and property. Purchase online here.

More on