Charity investment guidance for the 21st century

To what extent should a charity align its investments with the charity’s purposes?

Guidance for charities in Scotland

In November 2018, this question was answered for Scottish charities, with the publication of OSCR’s first investment guidance. Section 5 of this guidance sets out how to align investments with a charity’s purposes, including information which explains:

  • negative screening,
  • positive screening,
  • social and environmental returns,
  • ESG (environmental, social and governance factors) and
  • using investments to influence change.

The case studies in section 7 further illustrate examples of how some charities have excluded sectors of concern from their investments.

Guidance for charities in England and Wales

Attention now turns to England and Wales, following developments on 4th March 2019. BWB law firm has issued a letter to the Charity Commission and the Attorney General on behalf of a coalition of charities, requesting a Tribunal Reference to consider whether and how charities in England and Wales are expected to align their investments with their objects.

Why is clarity needed?

The rationale they set out for the request is based on the backdrop of case law which is nearly 30 years old, and viewed as outdated. The Charity Commission’s investment guidance in England and Wales, CC14, is said to be insufficiently robust on the question posed at the start of this article. In particular, carbon intensive assets or the nature of the impact of climate change on investment decisions were not considered in that old court case, where the historic context was the apartheid regime in South Africa and the extent to which investment should be made in companies with a South African business connection.

It will be interesting to see what next steps emerge, in terms of new Charity Commission investment guidance, a Tribunal Reference going ahead, both or none of the above. There is also an invitation for charities to join the coalition, which could lead to some traction building around the need to resolve the uncertainty which is felt to exist in English law.

Responding to charity client requests

What I’ve certainly noticed over the last eighteen months is an increase in requests from charity clients to exclude ‘fossil fuel companies’ from their investment portfolio, a request we can implement. Not only has this request come from the kind of charity which has a focus on poverty, but also from a health-focussed body which is concerned about air pollution and health impacts, and an organisation with a focus on children. Universities and church groups have also seen this question appear on their agenda.

It’s certainly possible to argue that holding investments and using them to engage with companies to influence for positive change is an alternative approach. For some investors, that is seen as an inadequate response, in the situation where a core business model of a company is not transitioning to a low carbon operating model in the preferred timescale of the investor. A range of views exist in this area and we’ll be watching developments with interest.


Investment involves risk. - The value of investments, and the income from them, can go down as well as up and an investor may get back less than the amount invested. Past performance is not a guide to future results.