London, 8 August 2023 –The Chartered Governance Institute UK & Ireland (CGIUKI) welcomes the Charity Commission’s updated guidance on making charity investments, Investing charity money: guidance for trustees, also known as CC14.
The changes to the guidance make it significantly clearer, shorter and more accessible to all trustees, including those without a financial background. The guidance emphasises that, as ever, trustees are bound by their charity’s purposes, but that they have the discretion to consider factors other than simply financial return when making investment decisions.
The Commission’s updates reflect the outcome of the Butler-Sloss ruling, which clarified that trustees have the ability to choose to exclude investments which may conflict with their charitable objects. The updated CC14 clearly sets out a variety of approaches to financial investments which trustees may choose to take, which include concentrating solely on financial return, choosing to avoid certain types of investments due to their negative environmental or social consequences, or choosing to actively engage with such investments with the aim of improving their practices. It also reiterates that such decisions must be made to further the charity’s purposes, rather than be based in personal opinion. This clarity is timely, as more charities consider incorporating environmental, social and governance (ESG) factors into their investment choices. CGIUKI is pleased to see that the guidance sets out a variety of approaches, and gives trustees the ability to make decisions which are in the best interests of their charities.
In addition to this important clarification, the guidance provides succinct and accessible information on key topics including attitude to risk, setting an investment policy, delegating to an investment manager and investing permanent endowment. Social investments are also covered by the guidance, covering trustees’ duties when making social investments as well as the key factors to consider in decisions. CGIUKI appreciates that the guidance is inclusive of different sizes of charity, and in particular that it caters to smaller charities, for example with a dedicated section for those charities which mostly invest cash. In an operating environment marked by high inflation and funding squeezes, it is more important than ever that charities of all sizes feel equipped to make the best use of their investments.
Peter Swabey, Policy and Research Director at CGIUKI, commented:
“We are encouraged to see that the Charity Commission is enabling trustees and supporting them in exercising the discretion they need to best manage their investments. The careful management of financial resources is a central part of effective governance, and each board should approach this with their charity’s objects front of mind. Trustees would do well to take this opportunity to review their existing investments and to ensure that their investment policy still accurately reflects their position.”
For further information, please contact Emily Ford, Policy Adviser at email@example.com.