A large part of a charity’s work will be dependent on its investment performance, as income/capital will be needed to fund its charitable purpose. Trustees should seek to maximise investment performance in order to maintain their charitable work.
A charity’s investments can, however, lead to its own internal conflicts as many investment funds specifically invest in companies that go against a charity’s aims. A common example of this would be the investment in tobacco products for a charity whose primary aim is to assist those with cancer.
The recent case of Butler-Sloss and others v The Charity Commission for England and Wales and another considered whether a Charity could exclude certain investments not in line with their charitable purpose even when this could reduce investment performance.
Butler-Sloss and others v The Charity Commission for England and Wales and another
The case was brought by Trustees of the Ashden Trust and Mark Leonard Trust and a declaration was sought to approve their new investment policy. The focus of both Charities was climate change and the proposed investment policy prohibited investments that did not align with this. In excluding those investments the Charities were making a stand against those companies in an effort to further promote the campaign against global warming. In doing so it was accepted the investment policy could diminish returns.
The starting point for such policy would be that the Trustees were required to maximise returns for the Charity with any ethical concerns being considered after, as decided in the case of Harries v Church Commissioners for England. The case of Harries v Church Commissioners for England was brought in 1992 and sought to restrict investments in South Africa, a country that supported the apartheid rule at the time.
In the current case, the Court’s finding was different and the Trustees were granted the declaration they sought. The Judge commented that the investment policy may lead to a change in greenhouse gas emissions and that the decision by the Trustees balanced that purpose against any detriment the investments may incur. In making the declaration, the Court felt the Trustees had complied with their obligations to act honestly, reasonably, and responsibly.
This case confirms charities are able to exclude specific investments from their portfolio should they not align with their charitable purpose. This can be a powerful tool in promoting a charity’s aim and taking a stand against the offensive issue. Trustees should, however, ensure any decision is balanced in order to avoid such losses that limit the charity’s fulfilment of its aim.
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