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Charities and new ESG investment policy ruling

20 September 2022

Developing an investment policy that takes account of legitimate ESG factors - long awaited legal clarification for charity trustees.

For many years charity trustees have been struggling to balance their wish to invest responsibly with the need to maximise their investment returns, and case law has been slow to respond to the challenges faced by trustees wanting to develop investment policies that take account of environmental, social, and governance factors, whilst still properly and lawfully discharging their powers of investment.

In accordance with Charity Commission guidance (which is based on the Harris v Church Commissioners for England [1992] 1 WLR 1241 case, the ‘Bishop of Oxford case’) charity trustees who financially invest charity funds must do so with the aim of yielding the best financial return within the level of risk considered to be acceptable.  The Bishop of Oxford case noted some exceptions to this principle, but the judgement was clear — trustees must not make investments based on moral principles that might risk financial return for their charity. 

Long awaited clarification for trustees on this point has come in the form of a judgement handed down by the High Court in April this year (Sarah Butler-Sloss and Ors v The Charity Commission and HM Attorney General [2022] EWHC 974 (Ch)).  Whilst only persuasive and not binding, the ruling is powerful in that it provides useful guidance for trustees wishing to reasonably adjust their investment policies in light of increasing environmental concerns. 

In this case, declarations from the court were sought from the trustees of two charities established with general charitable objects. The charities focussed on activities that furthered the purposes of environmental prevention and improvement, and the relief of need.  The trustees sought clarity on whether, in adopting investment policies that would exclude a range of investments that were not aligned with the goals of the Paris Agreement, they were properly and lawfully discharging their investment duties, even where the extent of any consequential financial detriment could not be fully determined.

The judgement confirms that trustees who are of the reasonable view that a particular investment conflicts with their charitable purposes can exercise their discretion whether to exclude it, provided they balance all the relevant factors, acting honestly and reasonably in doing so. 

Trustees wishing to adjust their investment policies to exclude investments should read the judgement carefully, as it includes clarification of the factors that need to be taken into consideration when developing responsible investment policies.


If you would like to discuss any aspect of this article further, please contact Joanna Blackman or any other member of the Charities and Social Economy team on 0113 244 6100.

You can also keep up to date by following Wrigleys Charities team on Twitter.

The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors. 




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Joanna Blackman


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