Revised guidance on investing charity money | CFG

CFG’s Head of Policy, Richard Sagar, takes a look at the Charity Commission’s revised guidance on charity investments (CC14) and shares an update on the sector’s work to develop complementary principles.

There is much to commend in the updated CC14; it now provides greater clarity on investment decision-making and is more accessible for trustees.

Notably, confusing terminology such as ‘mixed motive’ investment and ‘programme related investment’ has been incorporated under the heading of social investment.

The Commission has also removed the term ‘ethical investment’, instead replacing it with ‘social investment’ which focuses on achieving charities’ purposes directly through the investment, as opposed to purely focusing on financial return.

The new guidance more faithfully incorporates recent legal changes, including the balancing act that charities should undertake when considering the potential investment benefits alongside risks. And it more clearly expresses the discretion that charities have in choosing investments that align with their values, providing they further their charitable purposes.

Example scenarios are provided in the guidance, and these also indicate that beyond merely excluding investments because they are deemed to conflict with a charitable purpose or harm its reputation, charities are allowed to proactively make investments in companies because of ESG factors, if charities deem it will help support the purposes of the charity.

The guidance states:

“alongside the financial return you are aiming for, avoiding or making investments in companies because of their practice on environmental, social and governance (ESG) factors such as: climate, human rights, sustainability, community impact and board accountability. Taking this approach could be in your charity’s best interests if it could protect or enhance the financial value of your investments or returns over time, or because it will support delivery of your charity’s purposes more directly.”

On the whole, the revised CC14 is therefore much improved and has taken into account feedback from stakeholders, including CFG.

There is a lot more to be said about the specifics in the guidance, and others have given a more detailed and holistic account of all the relevant changes to be aware of. Kate Rogers, from CFG’s corporate partner Cazenove Capital, has published a useful overview with further insights.

In due course, CFG will endeavour to help charities understand it fully via our trainings and events, and through content developed with our investment partners.