Charity Commission publishes summary of responses to its proposed investment guidance

19 August 2021


The Charity Commission for England and Wales has today published a summary of responses received during its consultation on revising its investment guidance. Earlier this year the Commission proposed a series of changes to CC14, the guidance for charities on how to make investment decisions, including simplification and a more permissive approach for charities seeking to pursue what it called ‘responsible investment’.

ACF’s submission (.pdf 461KB), which was based on member views and the evidence gathered by the Stronger Foundations working group on investment, welcomed the direction of the proposed changes but called on the Commission to avoid a ‘false binary’ between responsible investment and strong financial returns. We asked that the Commission present responsible investment as a starting point for trustees rather than something to be justified, and as a methodology for achieving both good financial returns and to meet public expectation.

In the Commission’s summary of responses, it is clear that ACF was aligned to a majority of more than 200 others who gave evidence. The Commission notes that its proposed changes received a ‘positive response’, but ‘the consultation results also show that there are areas to continue to carefully consider: most notably the terminology used, and a perceived implication in the draft guidance update that a responsible investment approach means lower returns’.

The Commission reports that:

  • 42% of charity respondents, in their written comments, gave positive feedback welcoming the draft guidance update. Comments included references to: improvements in tone, removal of uncertainty and support for the shorter easy-read style
  • 84% of charity respondents to the survey, after having read the draft guidance, said they were confident that adopting a responsible investment approach is a valid option
  • for those identifying problems with the use of the term responsible investment, their main concern was that the Commission’s proposed use of the term is too narrow because it only references taking the charity’s purposes into account when making investment decisions. Investor charities and advisers understand the term more broadly, to include taking into account environmental, social and governance (ESG) factors
  • 17% of charity respondents and 57% of adviser respondents, in their written comments, raised points about a perceived implication in the draft guidance update that a responsible investment approach will generate lower returns
  • 20% of charity respondents and 28.5% of adviser respondents, in their written comments, said that the Commission, as regulator, should place a positive expectation on investor charities to consider the wider impact of their investment approach. In these comments, there was a particular focus on the impact of climate change

The Commission notes that it engaged with charities and other policy makers during the consultation including ‘17 large investor foundation charities and their representative body, the Association of Charitable Foundations’. ACF was pleased to host a member engagement session with the Commission’s lead for the consultation via our Members’ Policy Forum, which was open to all members.

There will now be a pause on taking forward the revised guidance. As the Commission notes:

‘During the consultation two charities were granted permission to bring a case relating to responsible investment to the High Court. They are seeking clarification of the law, and there will be a court hearing in 2022. As the court’s decision may affect our final guidance, we will not publish it until the court has given its judgement. We are very grateful for the valuable and constructive insights we have had from charities, advisers and other stakeholders on this important and complex topic. Many respondents have offered more input and support. Following the court judgement, we will look again at whether further engagement is needed to help us to develop our published guidance.’