Charities are being urged to ensure they are open with the public about their investments to increase trust and confidence in their work.

This is one of seven issues laid out in the Charity Investment Governance Principles (CIGPs), which have been developed by sector groups including the Charity Finance Group and are aimed at complimenting Charity Commission guidance.

“As a charity's investments are an integral part of its operations, being open and accountable about the investments is a key pillar in building trust and confidence” among the public, states the guidance.

It says charity boards need “a shared understanding” of how transparency can build public confidence, such as through annual reports and investment policies.

They also need to understand how “any related reputational risks ought to be managed”.

In addition, charities need to ensure there is a plan in place to communicate with stakeholders about charity investments.

Other sections of the guide cover the purpose of investments, leadership, integrity, decision making risk and effectiveness of investments.

They have also been developed following the Butler-Sloss High Court case, which focused on the importance of charities investments furthering their purpose even if it locks them out of parts of the market that may be more lucrative such as fossil fuels.

Equity, diversity and inclusion

Another principle focuses on the importance of equity, diversity and inclusion (EDI) in charity investment policies.

“An inclusive approach, where different voices are heard and the views of stakeholders are effectively considered, is the starting point to address inequities within investment practice,” says the guidance.

“There is a growing understanding that a lack of diversity within charity investment practice, including among trustees, staff, committee members and in the teams of those providing investment management and advice, can lead to groupthink, power imbalances and result in weaker decision-making.

“When a charity addresses inclusion and diversity in a meaningful way, steps to make progress towards equitable investment practice can be determined and acted upon.”

Bates Wells partner Luke Fletcher, who is an expert adviser on the sector steering group set up to develop the principles said their launch “marks a significant development for charity investors”.

“The principles provide practical, actionable guidance that empowers trustees and charity leaders to make informed, confident decisions about investments, he said.

“We are delighted to see the idea of the principles being taken up and coming to life. The principles will support trustees to invest well and generate good returns, whilst responding to some of the key challenges of our time, such as climate change.”

Others involved in developing the principles include the Association of Charitable Foundations, National Council for Voluntary Organisations, Wales Council for Voluntary Action and the Secretariat of the Charities Responsible Investment Network

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