Charity Commission updates CC14 guidance

Shorter and sharper. That was the Charity Commission’s ambition when updating CC14: Investing charity money: a guide for trustees, following a consultation process with 1,000 charities, sector representatives, and other stakeholders. At approximately a quarter of the length of the previous version, the commission has largely achieved this while retaining the fullness of the guidance for trustees. Its hope is it makes it easier for trustees to find the advice they need while removing outdated terminology and incorporating recent sector developments. These are the key changes: 

Clearer guidance 

There has been a notable effort to give more clarity to the language used in the guidance and to empower trustees to have greater confidence in their investment decisions. To aid this, examples of various issues that could come up when making investment decisions have been included, such as the impact on the charity’s reputation, or the consideration needed for any conflicts of interest.  

As in previous versions, steps that trustees ‘must’ take to be legally compliant and ones they ‘should’ take for best practice feature throughout. The need to act in the charity’s best interest in furthering its purpose is repeatedly emphasised as the priority. 

Removal of the term ‘ethical investment’  

Many terms that were open to interpretation have been removed. The most significant deletion is the term ‘ethical investment’, with a greater focus on investments that further a charity’s purposes. This reflects a shift in tone when it comes to responsible investment strategies from the more simplistic exclusionary approach that ‘ethical investment’ was built around to a more thoughtful, holistic approach. The terms ‘mixed motive investment’ and ‘programme related investment’ have also been removed given the difficulty in appreciating the balance between financial investment and charitable objectives. 

Incorporating the High Court judgement on responsible investment 

One of the biggest talking points for charity investors is how charities consider environmental, social and governance (ESG) factors when making financial investments. Following last year’s noteworthy judgement regarding the responsibility of charity trustees when investing (the ‘Butler-Sloss’ case), the guidance confirms  the relevant legal findings of the case.  

Trustees still have the duty to consider the appropriate investment approach based on the charity’s circumstances. This can be only focusing to produce a financial return, but now there is a greater clarity that this may involve an approach that also considers factors such as ESG, the reputational risk to the charity, or any potential conflicts of interest alongside the financial return. 

Each charity is unique 

The commission was keen to emphasise that trustees should feel empowered to make the investment decision that is right for them and to regularly review this as circumstances change. Helen Stephenson CBE, chief executive of the Charity Commission, said: “We are clear that each charity’s situation is unique, and there is no ‘one-size fits all’ approach to charity investments. We are also clear that trustees have discretion to choose what is best in their circumstances and a range of investment options open to them.” 

The importance of an investment policy 

The update has extended guidance to confirm that all charities with invested assets must have a written policy stating their reasons for investing. It goes on to state that charities must take professional advice from an investment manager (like RBC Brewin Dolphin) or an appropriately qualified trustee. Charities must consider this advice objectively, manage any potential conflicts of risk with the adviser, and ensure all trustees, staff and advisers are familiar with and can implement the policy.  

Our thoughts on the guidance 

The desire to be shorter and sharper has definitely been fulfilled, as the language used is much more accessible. Terminology that was relevant when it was first published in 2011 has felt increasingly outdated in recent years, particularly for charities looking to invest in a socially responsible way. Arguably, the guidance could have expanded further in this area, with the new guidance perhaps just ‘catching up’ with what is already happening in practice.  

At RBC Brewin Dolphin, the majority of charities we work with regularly update and address responsible investment in their investment policy. Alongside this, we integrate ESG factors into our decision-making process as standard for all clients, with a strong and growing approach to stewardship that resonates with trustees who are themselves stewards of the charity’s assets. This approach gives trustees greater confidence that their assets are aligned with the values and ethos of the charity, in turn protecting the reputation of the charity. We would hope to see the guidance in this area evolve further. 

All in all, the guidance confirms that there is no one answer when it comes to investing for charities; be it in terms of investment time horizon, the need for income, acceptance of short-term volatility in pursuit of long-term returns, or sustainable investment considerations. We have built our service around listening to each client and delivering a solution suited to their individual needs today. That can then evolve through time as a charity’s circumstances or market and economic conditions change. The guidance endorses such a tailored approach and should give Trustees confidence that they are fulfilling their duties and acting in the best interest of their charity.   

How does RBC Brewin Dolphin work with charities? 

As one of the UK’s largest bespoke charity investment managers, our team of over 50 charity specialists work with over 1,700 charity clients across the UK to help them achieve their financial goals1. Every charity is different, but a common theme is investing to generate an income and grow the investments to protect against inflation. To find out more about how we can tailor our approach to meet your needs, visit www.brewin.co.uk/charities or email charities@brewin.co.uk. 

The value of investments, and any income from them, can fall and you may get back less than you invested. We will only be bound by specific investment restrictions which have been requested by you and agreed by us.