What Should Charity Trustees Consider When Adopting An Ethical Investment Approach?

We have recently written a blog on the case of Butler-Sloss and others v The Charity Commission for England and Wales and another where the Court found that charity trustees can take an ethical investment approach even if this means they won’t get the best possible returns on those investments.

In making the judgement the Court was clear that trustees of a Charity need to be careful to ensure that the manner in which they adopt such an approach allows them to discharge their legal duties and obligations.

It may be that such an approach is taken on moral grounds however this can be quite difficult – after all, the supporters of a charity and indeed even its own trustees, may not hold the same moral view.  One of the tricky issues with morality is that there is rarely a ‘right’ and ‘wrong’ position but rather a range of views.

What approach should charity trustees take into consideration when adopting an ethical investment approach?

In deciding to depart from the standard requirement to seek the best possible investment returns, trustees should consider the following;

The above list is by no means exclusive and serves to highlight the careful balancing act that the trustees should strive to achieve in ensuring that everything they do furthers the charity’s objectives whilst also ensuring that they do not compromise the charity’s ability to continue to operate as a going concern in the future.

One thing that was made quite clear by the Court was that if the trustees have undertaken an honest balancing of all of the relevant factors then they will have complied with their legal duties. Even if the Court or other trustees may have come to a different conclusion this should not leave the trustees open to criticism.

Comment

The Charity Commission has indicated its intention to revise its investment guidance following the decision and we would recommend that all charity trustees keep an eye out for this.