Regulator reveals draft guidance on how charities can invest responsibly

The Charity Commission has published draft guidance for charities on how they can invest responsibly and in line with their mission and purpose.

The guidance makes it clear that charity trustees can choose a responsible investment approach in line with the charity’s purposes and values, rather than just focus solely on strong financial return.

Ahead of the draft guidance’s publication the regulator had staged an “informal listening exercise” earlier this year.

This identified that the Commission’s own guidance had been a barrier among charities to their responsible investment.

“Some trustees felt they are unable to make responsible investments, because they perceive they have an overriding legal duty to maximise the financial returns when investing, regardless of any other consideration,” said the Commission.

"Other charities felt that there was “a perception that the Commission does not accept that trustees can comply with their duties fully if they adopt a responsible investment approach."

"The new guidance also stresses that trustees’ decisions around responsible investment must “always be made in the best interests of the charity, and in line with its governing document”, added the regulator.

Also included in the guidance is advice around the rules when charities invest permanent endowments.

Consultation launches

The Charity Commission has launched a fresh, six-week consultation around the draft guidance. This closes on 20 May, 2021.

“During the listening exercise we held last year, we learnt that many charities are interested in considering responsible investments but need more clarity around the regulatory position,” said Charity Commission director of communications and policy Paul Latham.

“We have worked hard to ensure our draft guidance is easy to understand and empowers trustees to make decisions that are right for their charity.

“I encourage trustees, charity staff, those involved in investment management, and anyone with an interest in how charities are run to take part in our consultation, to help ensure our final guidance is as clear and empowering as possible.”

The charities advice on responsible investments is part of its wider guidance on Charities and Investment Matters (CC14).

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