The Charity Commission will assess whether the existing ‘responsible investments’ guidance is preventing charities from investing effectively, it has been announced.
The review comes after research found that “the way responsible investment is outlined in its current guidance is not giving some trustees sufficient confidence that they can consider this approach to investment”.
Defined as “financial investments that align with a charity’s mission and purpose”, responsible investments are common among not-for-profit organisations looking to generate long-term, sustainable returns.
But the question of “how, why and where” charities should invest funds is becoming increasingly “challenging”, the Charity Commission said in its report.
According to the study published last year, trustees are deterred from responsible investing for a number of reasons. This includes a perceived “legal duty to maximise financial returns when investing, regardless of any other consideration”, while others report that case law is “outdated” and “at odds with public expectations of how charities should behave”.
Trustees also reported that they are “anxious about making mistakes and the potential for resulting liability”.
In response to the research, the Charity Commission plans to consult and publish draft guidance in Spring this year to better support charities to take advantage of responsible investing.
Commenting on the upcoming review, Paul Latham, Director of Communications and Policy at the Charity Commission, said: “It is not for the Commission to instruct charities on how to invest their assets. But it is part of our role to ensure our guidance keeps pace with wider changes in society, so that charities feel confident to invest and use their resources effectively in line with their purpose, and be accountable to the public and donors.
“We are grateful to all those who took part in last year’s listening exercise, and we hope that charities, investment managers and others will take the opportunity to offer feedback when we publish draft guidance in the Spring.”
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