The Charity Commission has published its updated guidance on investments to consider last year’s landmark Butler-Sloss investment judgement by the High Court.
The fresh guidance specifies that trustees have discretion to choose investment options provided they ultimately further their charity’s purposes.
This considers the Butler Sloss decision, which gave charities the go ahead to align their investments to counter the impact of climate change, even if it means losing out financially by excluding a large part of the market.
Prior to the High Court ruling trustees had been advised to focus on maximising their return on investment and only consider ethical or moral considerations in rare situations.
The guidance, which has been drafted in consultation with charities and sector organisations, has removed terminology such as “ethical investment”, which “could get in the way of trustees’ understanding” of investment issues, said the Commission.
It also aims to explain “that acting in the best interests of a charity is about ensuring that above all else any decision furthers its purposes”.
In addition, it warns trustees “to not allow personal motives, opinions, or interests to affect the decisions they make”.
“Our refreshed guidance will help trustees make well-informed, carefully considered decisions about how to invest on behalf of their charity in a modern context,” said Charity Commission chief executive Helen Stephenson.
“We would like to thank those who have played a part in helping us shape the updated guidance. We are clear that each charity’s situation is unique, and there is no ‘one-size fits all’ approach to charity investments. We are also clear that trustees have discretion to choose what is best in their circumstances and a range of investment options open to them.”
User testing by the regulator found that seven in ten believed the new guidance was easy to read and almost nine in ten would recommend it to others.
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