Trusts request High Court ruling on mission-aligned investing

31 Jul 2020 News

Sian Ferguson, trust executive at the Ashden Trust and the Mark Leonard Trust

Two charitable trusts have applied for permission to ask the High Court to rule on whether charities must align their investments with their charitable objects.

Sian Ferguson, who is trust executive at the Ashden Trust and the Mark Leonard Trust, revealed her charities’ intentions at Civil Society Media’s Trustee Exchange Online conference earlier this week.

The move is the latest step in an ongoing campaign for legal clarity on the issue. In March last year, a coalition of 55 organisations sent open letters to the Charity Commission and the attorney general asking them to clear up charities’ investment responsibilities.

However, Ferguson said that during subsequent meetings that year, “the coalition received no indication that either would seek legal clarity of their own volition”. As a result, the two trusts decided to seek legal clarity themselves.

The trusts submitted their applications last month and are now awaiting a response.

Ferguson said: “This is our trust's current predicament. Finance is aligned with temperature rise of 3.9°C, and that will have devastating consequences for all of us, but especially for our beneficiaries.

“Evidence suggest that very few companies and funds are aligning with climate change of well below 2°C, and preferably 1.5°C.

“So my trustees are unclear what they are obliged or permitted to do with their investments, bearing in mind their wish to achieve good financial returns now, and in the future for grantmaking, and not drive climate destruction through their investments.”

Three main queries

Ferguson said that in the trusts’ applications, the trustees set out queries relating to:

  • Whether investments that are not aligned with the Paris Agreement on climate change are in direct conflict with the trusts’ particular charitable purposes.
  • Whether the trustees are entitled to balance any potential conflict with any anticipated financial detriment.
  • Whether the Charity Commission’s CC14 investment guidance is inaccurate in stating that it is merely permissible, rather than mandatory, for charity trustees to avoid investments that directly conflict with their charitable purposes.

In order to make the applications, the trusts had to evidence their trustees’ concerns, examine their existing policies, develop the updated policies that the trustees would like to pursue, and obtain information from advisers and fund managers about the implications of those policies.

Under consideration

A spokesperson for the Charity Commission said the regulator is considering the charities’ request and cannot comment while that assessment is underway.

They also highlighted that in January this year, the Commission launched a consultation seeking to understand the barriers that charities face to aligning their investments with their mission.

“Separately, we are undertaking a programme of work to understand the barriers that trustees feel prevent them from investing responsibly, in line with their charity’s purpose and values.

“Earlier this year, we sought views from the sector, and we are now considering how best to help trustees navigate this complex issue.”

Charities increasingly investing responsibly

Ferguson was speaking on a panel alongside Emilie Shaw, portfolio director at Cazenove Charities, who teased a few findings from her firm’s forthcoming Intentional Investment report.

She said that in a survey of 295 charities, 77% were now looking to adopt a responsible investment policy which aligns their investments with their charitable mission.

This was up from just 59% in 2015 and 23% in 2009.

She added that one of the main drivers for this is an increasing recognition that investing responsibly need not be to the detriment of financial returns.

Editor's note: This article has been amended as the charities are seeking a ruling from the High Court, not the Charity Tribunal as was original stated.

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