Exploring Charity Investments

Charities are increasingly being judged not just on the work they do but also on how they operate and adherence to their core values in all areas.  How a charity invests surplus funds is coming under scrutiny and can generate adverse publicity in respect of an issue that the charity may not have been fully aware of.  Historically, charities are likely to have looked for the highest return on their investments to maximise the income for the charity but may not have considered if the investments made are in line with the charities aims.

In guidance issued this month, the Charity Commission are asking for the views of charities in terms of how they review and monitor investments in order to establish what is preventing charities from engaging with responsible or ethical investing.  They want to know charity’s experience and considerations around responsible investments and what the barriers are. They are also looking for consideration of what could be done to support trustees to invest in a way that reflects the charity’s purpose and values.  A link to the email is included in the attachment.

If Trustees are in a position to invest funds, it is important that they review the Charity Commission guidance. In summary this recommends that trustees should:

  • decide on the overall investment policy and objectives for the charity
  • agree the balance between risk and return that is right for their charity; this may include a wide range of factors that will impact on return including environmental, social and governance factors
  • have regard to other factors that will influence the level of return, such as the environmental and social impact of the companies invested in and the quality of their governance
  • be aware that some investments may have tax implications for the charity
  • invest any permanently endowed funds in a way that helps them to meet their short and long-term aims
  • decide whether to adopt an ethical, socially responsible or mission related approach to investment and ensure that it can be justified

Any investment decisions should be fully documented.

The guidance emphasises the need to consider other factors in the selection of investments and this is an area that is likely to receive further emphasis in the future.

If you require any further information or guidance, please contact a member of the charities team at MHA Moore and Smalley on 01772 821 021.