The government has given the Charity Commission a “very clear steer” that it should change its investment guidance to give charities more leeway to invest in products that offer social as well as financial returns, minister for civil society Nick Hurd said today.

At a seminar on social investment organised by J.P. Morgan, Hurd said he was aware that many foundations with large endowments felt restricted by existing Commission guidance on investments.  He went on to say that the Commission “has received a very clear steer from us about a more positive attitude to social investment”.

Existing guidance emphasises the legal requirements of investor charities to maximise returns, so if charities want to invest in new products that balance financial returns with social impacts, the message from the Commission is generally “discouraging”, Hurd said.

“They (charities) have told us that if we want them to be the trailblazers by investing in these new social investment vehicles we need to make sure the Charity Commission sends more positive messages,” he said.

He added that the government had no intention of changing the law but said he had had discussions with new Commission chief Sam Younger and asked him to explore how the regulator might send a more positive message to charities that want to dip their toe in social investment.

“The Commission is looking at that right now,” Hurd said.

But Julian Smith, partner at Farrer and Co, said that while updated guidance from the Commission would be helpful, it would still be merely guidance.

“I think it would be much more powerful to have some clear exemplars in the market and encouragement within the voluntary sector community at large for other organisations to join in as well,” Smith said.