Closed - ‘Investment matters’ - Charity Commission consults on investment guidance

The Charity Commission, the independent regulator of charities in England and Wales, has launched a public consultation about its investment guidance.

In its latest draft, the Commission confirms that charities can validly consider seeking a return which brings social as well as financial benefits.

The Commission has updated its guidance to reflect how policy and practice have moved on since the last revision to its guidance in 2003. Many charities are now investing to deliver both a financial return and a direct social benefit, often described generally as ‘social investment’. This may involve considering ethical issues or how an investment helps further the charity’s aims directly. Sometimes, these ways of investing can achieve even more for beneficiaries and can therefore represent the best overall return for the charity.

The Commission has set out in draft guidance all the options for investments in order to enable trustees to make the best use of their assets, while also managing risks. The guidance makes clear that it is ultimately for trustees to decide the best approach for their charity, but sets out their duties and responsibilities when making these decisions. For some, this will mean seeking best financial return, for others it will mean a combination of both furthering their charitable aims directly and achieving a financial return.

The draft guidance also explains the different rules that apply to each form of investment. Charities can choose to concentrate on one approach or a combination of different approaches. The consultation will cover the key forms of investment that charities engage in, which include financial investment, ethical investment, mission connected investment and programme related investment (PRI).*

Dame Suzi Leather, Chair of the Charity Commission said;

“In 2010, registered charities held nearly £78 billion in investment assets, so clearly this is an important consultation for many trustees. It’s important that where charities are facing a tough funding environment, trustees have the tools to make the best use of their assets.

The Commission’s guidance has always allowed charities to use a mix of financial and social investment to achieve their aims, and we hope our consultation clarifies this even further by explaining what charities can actively do within the law.”

For a charity that is investing, ensuring it has a robust investment strategy in place is one of the most important duties for its trustees. The draft guidance also covers all key points which trustees need to consider including what the charity wants to achieve through its investment, how much it should invest, over what timescale, the charity’s position on risk and what powers, rules and duties apply.

The consultation document can be found on the Charity Commission’s website and is open until 28th February.

*Financial investment – investing to get the best financial return. Sometimes this way of investing can also directly further the charity’s aims (Mission Connected Investment) or reflect its ethical stance (Ethical Investment)
Programme related investment (PRI) - investing primarily to further a charity’s aims. There may also be a potential financial return.