The Charity Commission recently updated its guidance (CC14) for trustees on investing charity money. Redesigned to provide greater clarity on policy and processes, the latest changes aim to inspire trustee confidence when making investment decisions for their charity.
The trustee’s role
Charity trustees lead a charity, decide how it’s run, and ultimately make the decisions that will impact people’s lives. Their primary duty is to further the purposes of a charity, therefore the power to invest must be exercised to further its charitable purposes.
CC14 affirms the discretion that trustees have when making investment decisions that align with their charity’s purpose. However, decisions about investment objectives and policy should not be taken in isolation – they need to be aligned with the charity’s broader strategy and goals.
For most charities, the primary purpose of holding investments will be to generate a financial return, however in some cases social investment may be appropriate as a way of achieving the charity’s objectives directly through investment. Trustees are also allowed to take environmental, social, and governance (ESG) considerations into account when making investment decisions if it furthers the charity’s purposes.
As well as incorporating recent legal changes into the guidance, the Charity Commission expects all charities to have a clear investment policy, outlining how its investments align with its purposes and plans.
Investment policy is a topic often considered to be reserved exclusively for subject matter experts, however you don’t need to be an investment expert to ask sensible questions about your charity’s investment policy. In an effort to create a more accessible resource for trustees, CC14 also includes example scenarios of various investment approaches, which trustees may find helpful when reviewing or putting together their policies.
Charity Finance Group have plans to produce a set of Charity Investment Governance Principles to support the Charity Commission’s revised guidance. Focusing on investment decision-making, the principles are being produced in partnership with charity infrastructure bodies and investment experts. It will be interesting to see the final outcome and how this complements CC14 for the long-term.
As trustees, your principal duty is to further your charity’s purposes. This means that you must make your investment decisions to further those purposes.