This overview explains trustees’ responsibilities when setting investment policy. It covers how to reflect ethical screens, sustainability considerations, and mission-aligned approaches in a way that’s consistent with charity law and the Charity Commission for England and Wales’s updated guidance (CC14).

For more detailed information on the guidance please visit: Investing charity money: a guide for trustees – GOV.UK.

We also reference the best practices provided in the ‘The Charity Investment Governance Principles”.

1) How CC14 frames investment and charitable purpose alignment

No one-size-fits-all approach

CC14 emphasises trustees have discretion to determine what investment approach best suits their charity, provided that the approach furthers the charity’s purposes. They recognise that the same approach will not be suitable for every charity.

*EQ’s charity service can help trustees reflect the role of the investments in achieving the charity’s purposes, including managing risk, diversification, time horizon and the interaction of those with any sustainable or ethical investment ambitions. *

Responsible, sustainable & impact investment

CC14 explains that trustees can legitimately decide on the appropriate investment approach, including deciding to:

• Avoid investments that conflict with a charity’s purposes.
• Exclude investments that could harm reputation or reduce support for the charity from key stakeholders.
• Consider environmental, social and governance (ESG) risks and opportunities when making financial investments.
• Use active shareholder influence to promote responsible corporate behaviour and prevent misconduct.

*EQ’s investment team can help trustees explore the most appropriate set of sustainable, ethical, and negative screening objectives for your charity’s investments which support its mission without detracting from the financial goals. *

 Social investment is now embedded

• CC14 now incorporates social investment, where trustees aim to achieve charitable purposes through the investment itself while also seeking a financial return. This replaces older terms like “programme-related investment” and “mixed-motive investment.”

*EQ has decades of experience investing portfolios with dual mandates to create positive social and environmental impacts alongside a financial return. Our charity service can help trustees understand this and establish appropriateness and level of the impact ambition and particular goals to target. Where this is part of the mandate, we help measure the positive impact, which can be include in charity accounts or trustee reports. *

2) Balancing financial and non-financial (values) considerations

The updated guidance reflects recent legal developments, especially the Butler-Sloss judgment, which confirms:

• Trustees may take non-financial factors (such as mission alignment or reputational impact) into account when making financial investment decisions.
• Excluding conflicting investments is permissible under trustee’s discretion and even advisable so long as trustees balance relevant factors, understand potential fiscal impact, and believe the decision is in the charity’s best interests.

This discussion builds on advances in understanding of fiduciary duty that goes beyond charity endowment context. CC14 refers to additional legal documents that explore the underlying legal principles as well as provide examples.

*As part of the EQ charity investment service we understand the potential trade-offs of various levels of values-based investment decisions, as well as the risks of ignoring sustainability risks. We work with charity trustees to explore which investment approaches are most suitable, define exclusions or sustainable objectives which help produce the best financial return at a suitable level of risk for the benefit of the charity and its purpose.

3) What this means in practice for trustee responsibilities

Defining the investment policy

A sound investment policy should include:

• Strategic aims: What the charity wants to achieve financially and how its investments should support or reflect its mission.
• Risk appetite and diversification requirements.
• Approach to non-financial factors: Clear statement on whether and how trustees will take impact mission alignment, ESG criteria, or reputational risk into account.
• Social investment aims: If relevant, describe how specific social or mission-driven investments might deliver both impact and financial return and how these fit alongside the financial goals.

This policy should be documented, reviewed regularly, and aligned with both legal duties and the trustees’ understanding of the charity’s purposes.

*EQ supports charities with their Investment Policy Statements and can help with revisions, drawing particularly on our expertise around any non-financial objectives. *

Taking advice & delegating investment decisions

Trustees are expected to take appropriate advice on investments unless there is a good reason not to. This can include:

• Professional investment advisers or managers,
• Trustees with relevant expertise (but trustees are still accountable for decisions).

*EQ provides the expertise & discretionary investment management to agreed aims and strategy, with continued investment advice as part of our charity service. We know that priorities can change and want to be able to reflect that in the most appropriate investment approach at any point in time, focusing on long-term goals and purpose. *

Monitor & practice governance oversight, including reporting

CC14 makes it clear that delegation does not absolve trustees of responsibility, they must monitor performance, risk, and compliance with the ethical/sustainable/impact mission objectives, and any delegated authority.

In addition to CC14, a new Charity Investment Governance Principles framework was published to help trustees strengthen governance practices including monitoring. We consider this a good supplement, including case studies, for charities looking to go beyond compliance and build robust investment governance.

When it comes to what to monitor, trustees should:

• Review investment performance regularly, considering both financial and non-financial outcomes.
• Report in annual accounts and trustee reports how investment strategy has been implemented, including the outcomes of any value-based screens or sustainability objectives were applied.
• Monitor and reflect the investment policy statement and update for change necessary changes.

*EQ Investors offers transparent, engaging sustainability and impact reporting as part of the charity service. Our client portal summarises valuable information on investment performance, trading, and portfolio commentary as well as key data that helps trustees understand the non-financial achievements. Our reporting then can be used in annual accounts or trustee reports. Your dedicated portfolio manager will also be on hand to support through questions, updates and revisiting any portfolio aims. *

EQ’s summary for trustees:

• Trustees have broad discretion in deciding the investment approach, so long as decisions further the charity’s purposes and are informed, reasonable, and well-documented.
• They can account for impact mission alignment, ESG factors and reputational impact, but should carefully balance potential financial trade-offs and justify their approach.
• Increased clarity around duties and the added governance tools (like the Investment Governance Principles) can help trustees build confidence and stronger governance in investment decisions.
• To fulfil their responsibilities, seeking advice and investment management from a specialist like EQ Investors will support trustees across their journey: developing objectives that reflect financial and non-financial aims, documenting these, and being able to monitor and effectively govern their achievements.

Get in touch

If this sounds relevant to a charity you’re involved with, please contact our charity team at charities@eqinvestors.co.uk or call 020 7488 7133. We’d be happy to talk it through.

Please remember, this content is provided for information purposes only. Investment involves risk. Past performance is not a guarantee or indication of future results. Investment return and the principal value of an investment may go up or down and may result in the loss of the amount originally invested. All investors should seek professional advice prior to any investment decision, to determine the risks associated with the investment and its suitability.