The Charity Commission has recently published a summary of the responses received to a consultation on a proposal to update its guidance on responsible investments for charities.
211 responses were received and the charities that responded ranged from large to small organisations with a range of investment strategies.
The results were summarised by the Charity Commission as follows:
- “charity respondents – in all income groups – gave high survey ratings for the clarity of the draft guidance update
- 42% of charity respondents, in their written comments, gave positive feedback welcoming the draft guidance update. Comments included references to: improvements in tone, removal of uncertainty and support for the shorter easy-read style
- 84% of charity respondents to the survey, after having read the draft guidance, said they were confident that adopting a responsible investment approach is a valid option
- adviser respondents gave more neutral or low ratings to survey questions about the clarity of the draft guidance update and its potential to generate trustee confidence
- most charity respondents gave positive survey ratings for the use of the term responsible investment in the draft guidance update. However, in their written comments about the helpfulness of the term, views were more mixed: 19% of charity respondents commented that they approved of how the term was used, and 28% of charity respondents included comments that expressed concerns. 95% of adviser respondents’ written comments expressed concerns about use of the term
- for those identifying problems with the use of the term responsible investment, their main concern was that the Commission’s proposed use of the term is too narrow because it only references taking the charity’s purposes into account when making investment decisions. Investor charities and advisers understand the term more broadly, to include taking into account environmental, social and governance (ESG) factors
- 17% of charity respondents and 57% of adviser respondents, in their written comments, raised points about a perceived implication in the draft guidance update that a responsible investment approach will generate lower returns
- 20% of charity respondents and 28.5% of adviser respondents, in their written comments, said that the Commission, as regulator, should place a positive expectation on investor charities to consider the wider impact of their investment approach. In these comments, there was a particular focus on the impact of climate change
- all types of respondents gave positive survey ratings for the clarity of the draft guidance content for charities with a duty to invest. Written comments were more mixed: 17% of charity respondents commented that this content set out a useful framework for these charities. 26.5% of charity respondents and 43% of adviser respondents commented that it could be clearer
- 19% of charity respondents, in their written comments, raised points about the complexity of managing investments, and their reliance on the expertise of their specialist trustee sub-committees and professional advisers/managers…”
The Charity Commission has confirmed that it will not issue its final draft of the guidance on responsible investments until the Court has heard two cases brought by charities that have been given permission to apply for guidance on the current law on responsible investments for charities. These two cases are due to be heard in 2022.
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Kevin Modiri is a Partner in our expert Charity team.
Should you be affected by any of the subjects discussed in this article, please do not hesitate to contact Kevin or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.