1 / 18

Investing responsibly: Charity Commission Guidelines

Investing responsibly: Charity Commission Guidelines . Stephen Roberts Policy Legal Adviser. Investment of Charitable Funds: Detailed Guidance. Underpins CC14 Investment of Charitable Funds: Basic Principles Current version dated February 2003 Currently being reviewed.

Mia_John
Download Presentation

Investing responsibly: Charity Commission Guidelines

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Investing responsibly: Charity Commission Guidelines Stephen Roberts Policy Legal Adviser

  2. Investment of Charitable Funds: Detailed Guidance • Underpins CC14 Investment of Charitable Funds: Basic Principles • Current version dated February 2003 • Currently being reviewed

  3. Issues in investment guidance • What is an investment? • What is the proper use of an investment power? • Role of derivatives • Ethical Investment • Mission Connected Investment • Blended investment

  4. What is an investment? • Investor/investee • Company shares • Land let to produce a rental income • Tradeable debt • Non-tradeable debt • Units in collective investment schemes

  5. What does the Detailed Guidance not consider as an investment? • Commodities e.g. gold, vintage wine • Works of art • Premium bonds • Land purchased with a view to sale • Derivatives

  6. What is the proper use of an investment power? • The general power of investment (section 3 Trustee Act 2000) • Standard investment criteria: • Suitability of class of investments and particular investment • Need for diversification so far as is appropriate to the circumstances of the trust (section 4 Trustee Act 2000)

  7. What is not a proper use of the investment power? • Trading • Gambling • Speculation • Use of derivatives other than as ancillary to investment

  8. Ethical Investment • Ethical investment (also known as socially responsible investment) is investing for financial return, but having regard to other criteria such as environmental protection, health, human rights.

  9. Screening and disclosure • SRI/Ethical investment often involves • positive screens (focussing on companies that do good); or • negative screens (avoiding investments in a particular) • Examples include: • alcohol, tobacco, gambling; the environment, global warming; employment policies and practices; products/services; arms manufacturing/supply; animal testing; human rights/equality. • Disclosure of policy • any investment policy for charities over the statutory audit level must be disclosed • these charities are also required to state the extent to which environmental or ethical considerations are taken into account • this should apply to all charities as a matter of good practice

  10. Making an ethical investment • A charity’s governing document sometimes imposes specific ethical restrictions on the scope of trustees’ general power of investment – trustees must comply with these • Power of investment has to be used to further the purposes of the trust. Purposes will normally be best served by seeking the maximum return consistent with commercial prudence • Consider whether*: • a type of investment is in direct conflict with the aims of your charity • a type of investment might hamper the work of your charity (e.g. alienate beneficiaries or donors) • The financial return will be just as good even if other moral/ethical considerations are taken into account * Harries (Bishop of Oxford) v Church Commissioners [1992] 1 WLR 1241

  11. Positive considerations • Financial return more secure where company committed to sustainable development • Long term profitability secured by a particular moral approach to development of business

  12. Programme Related Investment/Social Investment • Not investment at all. • Their purpose is to directly further the purposes of the charity and not to secure a financial return to the charity. • Issue is extent to which furthers the purpose and whether the amount applied justifies that.

  13. Private benefit • Any private benefit arising from a social investment has to be incidental to the furtherance of the charity’s purposes • An educational charity investing in a profit making private school would not be an appropriate way of furthering the charity’s purposes by way of a social investment. It may be justified as a financial investment if the financial return justifies it.

  14. Mission Connected Investment • “We define an investment as an MCI if it: Targets a market rate of return and also helps a foundation to achieve its mission.” (Mission Possible: Emerging opportunities for mission connected investment – New Economics Foundation)

  15. Mission Connected Investment • Other definitions: “The term Mission Investing covers two distinct categories of investments: market rate investments that support program goals; and Program Related Investments (PRIs) structured to create specific program benefits while earning a below- market return.” (More for Mission website)

  16. Blending social investment and socially responsible investment • Mixing two different things: one is about a financial return to the charity and the other is about directly furthering the purposes of the charity. • Trustees need to be clear what they are doing in applying funds so they can be sure they are complying with the appropriate duties.

  17. Common Investment Funds • Corporate Manager has power to invest equivalent to general power of investment • CC14 detailed guidance applies • Difference between a charitable collective investment fund and a non-charitable collective investment fund

  18. CC14 Detailed Guidance • New style • Must/should • Legal underpinning • Discussion with sector

More Related