The Law Commission will explore whether trustees could do with new powers to give them more confidence to make mixed-motive investments, as part of its review of charity law.

Lord Hodgson, in his recent review of the Charities Act 2006, concluded that trustees are still not particularly confident about making decisions on social investment, and that even though the Charity Commission’s recent revision of its investment guidance, CC14, has tried to create a more permissible environment, the existing legal framework doesn’t support this.

As a result, trustees are often deterred from taking advantage of social investment opportunities.

So the Law Commission has decided to add mixed-motive investment to its review. It will examine whether anything can be done by way of law reform to make clearer the powers and duties of charity trustees in undertaking mixed-purpose investments.

In particular, according to Law Commissioner Professor Elizabeth Cooke (pictured), it will examine whether a new specific power to make mixed-purpose investments is feasible and would benefit charities.

It will also consider introducing a new legal power for non-functional permanent endowment to be invested in mixed-purpose investments, provided capital levels are maintained or restored within a reasonable period.

The scope of the review will not extend to the potential for social investment by charities to confer any “private benefit” to investors.

The new considerations around mixed-motive investments will be included in the Law Commission’s review consultation, due to open next summer.

The Law Commission has already announced that its review will cover the powers of the Charity Commission and Charity Tribunal, amendment of royal charters and statutory governing documents, the regimes for mergers and collaborations, and the insolvency treatment of certain assets.