New guidance on charitable investments for charity trustees

The case

The issue before the court in Sarah Butler-Sloss & Others concerned charity trustees’ duties when exercising their powers of investment, in particular the relationship between investments and charitable purposes.

The case was brought by the trustees of two charitable trusts, the Ashden Trust and the Mark Leonard Trust. Both charities wished to implement new investment policies, which would exclude any investments, as far as possible, that did not align with the aims of the Paris Agreement on climate change. They sought the court’s approval for the adoption of their proposed new investment policies to ensure that they were acting lawfully.

The concern of the Charity Commission and HM Attorney General, in responding to the trustees’ claim, was whether the trustees had adequately balanced the anticipated financial detriment the charity would suffer by the adoption of the proposed investment policy against the conflict which the excluded investments would pose to the charity’s purposes.

The judgment

Justice Green noted that the power to invest must be exercised to further a charity’s purposes. He explained that this would, ordinarily, mean maximising the financial returns on any investment; however, he found that trustees have a discretion as to whether to exclude investments that they reasonably believe are in conflict with their charity’s purposes, even where such exclusion may be of a financial detriment to the charity.

Next steps

Below are some key takeaway points for charity trustees from the High Court’s decision.

• 1) If your charity has investments and/or an investment policy, this is an opportunity to review your current policy and consider whether any investments can now be excluded which you may feel are in conflict with the charity’s objects, but previously felt obliged to include due to the high financial returns they deliver for your charity.

• 2) If you haven’t thought previously about investments your charity could make, but your charity does have funds it could invest, now is a great time to get familiar with your obligations in respect of charitable investments. Although it is expected to change, the best way to start is to get familiar with the Commission’s current Guidance, and all the relevant factors you are expected to consider when making investments.

• 3) Keep an eye out for the anticipated update to the Charity Commission’s guidance on charitable investments, once this becomes available. We will include a further blog providing any updates on this as and when they are published.

The Commission’s current Guidance on charitable investments can be read here, and the High Court’s judgment in this case can be read in full here.

If you have any queries about the topics discussed above, or there are any other issues we can help you with, please do get in touch with Laura Sherratt or Ben Brice.