Luke Fletcher: Where does the Charity Commission stand on the climate emergency?

01 Apr 2019 Voices

Luke Fletcher, partner at law firm Bates Wells examines the Charity Commission's role in combating climate change.

On my locker at work, I have a chart showing the trajectory of global CO2 emissions. It shows where the global economy is currently headed and the “emissions gap” between where we are going and where we need to be. This gap is the dramatic change in trajectory we need to see by 2030 if the world is to stay within a 1.5 degree world and avoid dangerous climate change, according to the findings of the IPCC, which has laid down the gauntlet by stating that we need to make major changes by 2030 to avert climate breakdown. The chart is a reminder of the scale of the challenge.

It is the urgency of this climate emergency that has inspired a growing coalition of foundations, NGOs and faith groups to come together at this time and to openly ask the Charity Commission and the Attorney General to refer important questions about charity trustee investment duties to the tribunal for a contemporary and authoritative ruling. Our sense is that, seen in its proper perspective, there is no more pressing question of charity law to be addressed. In essence, given that charities exist to benefit the public at large and must demonstrate as much to the Commission, the question is “how should investments be aligned with the interests of wider society?”. Understood properly, this question also extends far beyond the urgent issue of addressing climate change.

We have seen an amazing response. From a standing start, the coalition has grown rapidly in a matter of weeks and now comprises the RSPB (which is the civil society organisation with the largest individual membership, at approximately 1.2 million people), NCVO (which has approximately 14,000 civil society organisations as members of its own) and a growing group of foundations which owns now well over £2bn in assets. Pretty much every day significant and notable new members are joining, the latest being the Tudor Trust and Social Investment Business. I am sure we will grow it to a much larger coalition with a little more time, as people come to understand the issues.

Commission response

This was the Charity Commission’s initial media response:

“The Commission’s purpose is to ensure charities can thrive and inspire trust so that they can improve lives and strengthen society. It is our role to ensure charities meet the high expectations demanded by the public of being true to their own purposes and demonstrating the difference they’re making. We therefore welcome the letter from BWB and fellow signatories on the important issue of ethical investment. We agree that public attitudes to the broad issue of ethical investment by charities have moved on and we are sympathetic to calls for greater clarity for trustees.

However, a reference to the Tribunal could be costly, time-consuming and its outcome, by definition, uncertain. There are other options to consider which might achieve a better outcome and greater clarity and confidence in the scope trustees have for investing their charity’s money in line with their purposes, ethos and values”

It was not surprising to see in the Charity Commission’s initial response some expectation management. No doubt it would take some time to take the matter to a tribunal and it would involve significant effort and some cost. On this front, I have sympathy with the Commission. It must be incredibly difficult to develop and implement strategy in such a diverse sector with so many different interests and with limited resources and so I can understand why the Commission needs to steer a steady course and think very carefully about its priorities. That said, the value of a ruling would be inestimable to the charity sector and society as a whole and, given the amount of charitable assets under management and the range of positive and negative impacts which these investments are generating all of the time, I don’t believe there is any better use of time or effort.

There is also reference in the Commission’s response to the fact that a reference to the tribunal would have an “uncertain” outcome. This seems to be a straightforward acknowledgement on the part of the Commission that it does not know what a tribunal would say or therefore what the law currently requires of charity trustees, given the absence of legal authority to guide decision-making. This is exactly the point the coalition is making and the reason why a definitive ruling is needed.

In its response, there is also a slightly cryptic mention of the availability of “other options to consider”, apart from a tribunal reference. We wait to hear what options the Commission has in mind but I find it difficult to see how the Commission has the authority or the power to bring legal clarity to an area which is so lacking in relevant precedent. Surely that is for the courts and tribunal service, as in the absence of legal authority, any Commission interpretation will be arguable and potentially challengeable and no doubt there will be charity lawyers who have other interpretations. The courts and tribunal service is particularly well suited to questions such as this where pretty much everyone is interested and it is very difficult for anyone to make impartial or independent decisions.

To put this in perspective, the most influential and relevant case is the Bishop of Oxford case - which was decided nearly three decades ago now - was a decision on the specific facts of the Church Commissioners (which if truth be told is more like a pension fund than a regular charity, as it has to generate investment returns sufficient to meet pension related liabilities), the court in that case decided not to grant the declaration sought and all we have to go on about the ability of charity trustees to consider anything other than risk adjusted financial return were a few sparse comments made in passing. To cap it off, there was absolutely no consideration of climate change at the time.

We wait to hear what the Commission will do. One can imagine that questions of resources and priorities will factor significantly in its thinking. That may be so but the need for clarity in this critical area is not going to go away and so, whilst the Commission might need some support to be able to make a reference and there are actions it might take to mitigate the risks faced by charity trustees and the risks to trust and confidence in charities in the interim, one hopes that the Commission will acknowledge the critical need for legal clarity and the urgency and importance of the issues.

On this front, it was heartening to see in the Commission’s initial response an expectation that charities will invest “in line with their purposes, ethos and values”. This is what I expect a tribunal or court would today conclude that charities are required to do. But that is not what the Bishop of Oxford case suggests – not surprising given it was decided on particular facts and when the world was a very different place – and it is not even what current Charity Commission guidance requires.

We look forward to hearing from the Commission about where it stands. In any event, we plan to grow the coalition and keep this issue on the agenda unless and until there is a contemporary judgment which addresses the legal uncertainty which the Commission has acknowledged exists. Ultimately, we believe in the potential of charities as a whole to be true to their purpose to benefit society and so to lead the way for others who wish to do what is right for society when investing.   

Luke Fletcher is a partner at Bates Wells

 

More on

We use cookies to ensure that we give you the best experience on our website. Read our policy here.