The Charity Commission has published renewed guidance on charities and investments, following its call for information and consultation on financial investments.
It reflects a significant High Court judgment on charity trustees’ investment duties – the Butler-Sloss case.
The redesigned guidance, known as CC14, aims to offer greater clarity and to give trustees confidence to make investment decisions that are right for their charity.
The regulator said that the language used in the guidance is clearer and the structure has been updated so that it is shorter and easier to use, and so trustees can find the information they need more quickly.
It makes clear that trustees have discretion to choose what is best in their circumstances and have a range of investment options open to them, provided they ultimately further the charity’s purposes, the regulator added.
The guidance includes examples of various issues which may be relevant for trustees to consider when making investment decisions, such as the potential for an investment to conflict with the purposes of the charity, or the reputational impact of an investment decision.
The examples featured in the guidance are designed to help trustees identify the factors that are relevant to their own charity’s situation and then use this to determine how to approach their investment decisions. This should make it easier for trustees to apply the guidance correctly and feel able to justify that the decisions they take are in their charity’s best interests, the Commission added.
Commission: ‘We are clear that each charity’s situation is unique’
Helen Stephenson, chief executive of the Charity Commission, said: “Our refreshed guidance will help trustees make well-informed, carefully considered decisions about how to invest on behalf of their charity in a modern context. We would like to thank those who have played a part in helping us shape the updated guidance.
“We are clear that each charity’s situation is unique, and there is no one-size-fits-all approach to charity investments. We are also clear that trustees have discretion to choose what is best in their circumstances and a range of investment options open to them.”
Addressing trustees, she added: “We want to stress that investment approaches are your decision to make, and this guidance is designed to help you do so with confidence, and in line with the law.
“You must balance the potential benefits of your approach with any risks it brings to your charity and ensure that your decision ultimately serves your charity’s purposes. You may opt to take issues such as sustainability or climate impact into account, provided it is in the best interests of your charity.
“Our guidance contains clear advice on how to make sure you are compliant with the law and following best practice.”
The Commission conducted user testing during the drafting process with a sample of 1,000 charities, and also engaged with sector representatives and a range of other stakeholders.
The user testing found that 70% of respondents believed the draft guidance was easy to read, and around 85% had confidence in their next steps. Moreover, 85% would also recommend the guidance to others.
CFG: ‘It is by no means less comprehensive’
Richard Sagar, head of policy at CFG, said: “We were pleased to have had the opportunity to feed into the Commission’s consultation and we warmly welcome this renewed guidance for charity trustees. CFG had long argued that CC14 needed to provide greater clarity on investment decision-making, and the revised CC14 certainly does that.
“The Commission's updated guidance is shorter and more accessible, but it is by no means less comprehensive. The incorporation of guidance on social investment, along with the inclusion of example investment approaches, will be particularly useful to trustees. It more clearly details both trustees' legal duties and recommended best practice. This will give trustees greater confidence when deciding what is or isn't in the best interests of their charity.
“The work to support charity leaders with planning, managing, and reviewing investments doesn’t end here, however. CFG is in the early stages of collaborating with charity infrastructure bodies, law firms and investors to produce a set of investment decision-making principles to complement this revised guidance. We will be sharing more details of this work in the near future.”
Sarah Vibert, CEO of NCVO, said: “Investments can be an important source of funding for charities, so they maximise money to spend on work which will further their missions. Therefore, the Charity Commission’s updated guidance is really useful for trustees, as it makes it clear they have a significant amount of discretion in how they make decisions when it comes to investments.
“The purpose and mission of a charity is central to decision making, and the guidance should support them to make choices that further their purpose and ensure that any investments do not undermine that. NCVO’s Fuelling Positive Change campaign is an example where despite investment in oil and gas generating significant income historically, trustees may want to consider if that will remain the case and how it fits with their values, balancing the views of their members and stakeholders, their reputation, and ultimately what’s in the best interest of the charity.”
The Charity Investment Forum returns on the 4-5 December 2023. The event combines high-level investment insight with ample opportunities to meet and discuss problems with peers and charity investment professionals in a relaxed environment. Attendance is free for qualifying charities (with investment assets over 5 million). If you are interested in attending, please contact our events team via email at [email protected]
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