A coalition of some of the UK’s largest charities have urged the Charity Commission to seek a landmark ruling that could force charity trustees to prioritise mission-based investing over financial returns.

The charities, including RSPB, Joseph Rowntree Charitable Trust, Nesta, Ashden Trust and ClientEarth, which have been supported by law firm Bates Wells, have urged the Charity Commission and Attorney General to make it a legal duty for charity trustees to ensure their investments support their charitable aims and their duty to provide public benefit.

They have also requested specific legal guidance on whether charities should invest in companies that contribute to dangerous climate change, noting that temperature rises above the UN target of 1.5 per cent “present substantial risks to the overall economy, as well as to individual investment portfolios” and may undermine the aims charities exist to achieve.

“A court might conclude that there is some form of presumption that a charity investor’s investment strategy ought to be compatible with a transition to a ‘1.5C world’,” they said in an open letter.

The coalition also warned there is a risk charity trustees “misinterpret” their duties because the current law is “outdated and insufficient”, calling upon the Attorney General and Charity Commission to refer the issue to the Charity Tribunal for an ‘urgent and definitive’ ruling.

The request comes after the UN Intergovernmental Panel on Climate Change warned the world has just 12 years to limit climate change to 1.5°C. Even an extra half degree of global warming would significantly increase the risks of drought, floods, extreme heat and poverty for hundreds of millions of people, it said.

Commenting, Lord Williams of Oystermouth, the former Archbishop of Canterbury, said: “Investment policy has become a crucial area of moral debate at a time when we are at last recognising the urgency of issues around climate change. It is now of real importance that charity law should be clarified in a way that acknowledges the need to align investment practice with the imperatives of responsibility to and for our global environment.”

Professor Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment, added: “Charities exist for the public benefit and it is entirely logical that their investment decisions should also promote the public benefit.

“Over the coming decades, the world will make massive investments in the global economy, particularly in infrastructure and productive capital. How we make those investment decisions is critical for the future of our planet.

"We will either lock in sustainable prosperity or follow something like current paths which would involve unprecedented environmental risks for our children and grandchildren. The new and cleaner form of growth will be sustainable and inclusive, and very attractive, and the associated investments are likely to show a better risk-return profile for charities than those in old-fashioned, dirty and risky activities. Charities can and should lead by example, and need stronger and clearer guidance on their investment decisions.”

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