In 2023, the Charity Commission for England and Wales published a refreshed version of its guidance on investing charity money (CC14).
The law on charity investment and how to access professional expertise has not changed, so most boards will find that the release of the new version does not necessitate an urgent revamp of their approach or policy. However, you should refer to it when next reviewing your investment policy or if you are setting out a policy for the first time. For Scottish charities, OSCR publishes its own guidance, but trustees may find it useful also to cross-refer to the Charity Commission’s guidance.
The updated guidance is shorter and, most people will find, clearer than its predecessor. It begins by reminding trustees that their principal duty is to further their charity’s purposes and reassures us that, when it comes to investments, this will mean different things to different organisations.
Purpose-related considerations
Among other things, CC14 confirms that many boards will want to think not just about financial risk and return objectives, but about how else the investment assets are being used to advance the charity’s purposes. This might be, for example, through action by their fund managers to drive real-world change on issues that matter to the organisation such as climate change, inequality or mental health.
The guidance also calls for trustees to exercise their own judgement on whether and how to restrict investment in any particular type of business if they feel that it either contradicts their mission or would put their organisation’s reputation at risk. It notes that trustees may also choose to integrate environmental, social and governance issues into their investment strategy, whether to boost returns or protect their reputation.
Accessing professional expertise
When it comes to selecting investment assets or managing a portfolio, most charities will not have enough in-house expertise to do this themselves and will need to take professional advice – or much more commonly, delegate day-to-day decision making to a professional firm.
The guidance notes that for many trustees an appropriate way to do this is to invest in a collective scheme such as a specialist fund available only to charities, and this is the route preferred by many charities with long-term investments. There are plenty of funds available, including a number which offer different approaches to sustainability and ethical screening. So, as well as being a cost-effective way to access an all-round, diversified portfolio, most charities will find that this route also allows them to invest in a way that is aligned with their mission and values.
You do of course need to understand a fund’s investment policy and objectives and how these align with your own policy – both in relation to those objectives and compared to other funds with similar objectives. All the fund information you might require for this is available from individual fund managers and from third party sources such as the charity press. So, if you know what your investment priorities are, it should be fairly straightforward for the trustees to find one or more funds which are a good match for their charity’s needs and, subsequently, how well they are performing.
However, if you are developing your investment policy for the first time or revising it significantly to reflect changing circumstances, you may want to take (and you should expect to pay for) specialist advice from someone who understands the charity investment world and can help you navigate the market. If you do this, CC14 notes that you need to consider the advice objectively and do what is best for your charity. This includes thinking about any potential conflicts of interest that may affect an adviser, such as whether their own organisation is a fund provider or whether they might recommend funds provided managed by a firm with which they have a financial relationship.
Most trustees, if taking advice, would expect that advice to be independent and to encompass a full range of options to help you seek out the structure and provider/s that you believe will deliver the best outcomes for your charity.
Heather Lamont is a client investment director at CCLA, one of the UK’s leading managers of investments for charities, churches and local authorities, and a member of the advisory group for ICAEW’s Charity Community.
*The views expressed are the author’s and not ICAEW’s or CCLA’s