The Charity Commission has dropped the use of the phrase “ethical investment” in updated guidance.
The regulator has today published updated guidance on charities and investments, known as CC14.
The commission had promised to revise the guidance after the High Court’s “Butler-Sloss” ruling last year, which found that trustees can exclude investing in areas that run counter to their charity’s purposes even if it meant making lower returns.
The ruling reinterpreted a 30-year-old judgment, known as the Bishop of Oxford case, which found that charity trustees should maximise return on their investments except in circumstances where it conflicted with its purposes.
The commission today said its new guidance had been designed to offer “greater clarity and to give trustees confidence to make investment decisions that are right for their charity”.
The commission said: “As discussion continues within the sector about charities’ ability to account for factors such as the environmental impact of investments, the guidance makes clearer that trustees have discretion to choose what is best in their circumstances and have a range of investment options open to them – provided they ultimately further the charity’s purposes.”
The regulator said the new guidance “incorporates previously separate guidance on social investment and no longer uses terminology that could get in the way of trustees’ understanding, such as ‘ethical investment’, ‘mixed motive investment’ and ‘programme-related investment’”.
It said the guidance lists the steps trustees must take to be compliant with the law and says that acting in the best interests of a charity is about ensuring that, above all else, any decision furthers its purposes.
The guidance also “warns trustees to not allow personal motives, opinions, or interests to affect the decisions they make”.
Helen Stephenson, chief executive of the Charity Commission, said: “Our refreshed guidance will help trustees make well-informed, carefully considered decisions about how to invest on behalf of their charity in a modern context.
“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.”
Stephenson said she wanted to stress to trustees that investment approaches were their decision to make.
The regulator said the new guidance followed a consultation involving a sample of 1,000 charities, plus advice from sector representatives and other relevant stakeholders.