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Ethical Investments – What Charity Trustees Need to Know

Charity trustees are often required to make appropriate decisions about investment of their charity’s money. The Charities Regulator’s Guidance for Trustees notes that, in fulfilling this general duty, all charity trustees must exercise due skill and care when investing charitable assets and must always act in the best interests of the charity.

However, what happens when the best investment opportunities don’t align with the charitable purpose? Can a cancer-support charity, for example, invest in a profitable tobacco company? Or should trustees of a climate-change focused trust avoid investing in non-renewable fossil fuels?

The trustees of two charitable trusts in the UK recently brought these questions to the High Court, leading to a confirmation of trustees’ duties in this area in England and Wales

No place for “Moral Statements”

Until recently, the UK Charity Commission’s guidance on investment stemmed from the 1991 “Bishop of Oxford” case[1]. In that case, against the context of apartheid South Africa, the Bishop argued that, in exercising their investment powers, the trustees were obliged to have regard to the object of promoting the Christian faith. He contended that the trustees should therefore apply appropriate ethical consideration to their choice of investments. In response, the court held that trustees’ focus should be on maximising returns on charitable assets, stating that: “Most charities need money; and the more of it there is available the more the trustees can seek to accomplish.”

It was recognised in that judgment that limited circumstances can exist whereby investments of a particular type would directly conflict with the core aims of the charity. However, the judgment emphasised the bottom line that investment of charitable assets must not be used for “making moral statements”, to the financial detriment of the charity itself.

The Butler-Sloss decision

In the recent UK case, Butler-Sloss and Ors v The Charity Commission and the Attorney-General[2], trustees of two charitable trusts, with objects to pursue “environmental protection or improvement” as well as the “relief of poverty”, asked the High Court of England and Wales to clarify their investment duties. With a mandate to tackle climate change, the trustees sought to establish whether they were entitled to adopt investment policies that would exclude investments that conflicted with that objective – even if it meant cutting in half the number of potential investment opportunities, with the attendant risk of diminished returns on charitable property invested.

The High Court found that, in the normal course, a trustee’s duty of furthering a charity’s purpose will be best achieved by maximising financial returns. It stated however that, trustees may reach a “reasonable view” that certain investments conflict with those purposes, in which case they will have discretion as to whether to exclude those options.

The court laid down ten principles to guide trustees in exercising that discretion. It held that it is the trustees’ responsibility to reasonably consider and weigh up all of the relevant factors, including the likelihood and seriousness of any potential conflict with the charitable objects, and the severity of risk of any negative financial impact caused by excluding such investments.

Following that decision, the UK Charity Commission has issued an update on charitable investments. It confirmed that trustees have a wide discretion to consider and exclude certain investments based on non-financial considerations. It is up to charity trustees in the UK to develop investment policies that adequately promote the objects and aims of the charity, and pursue the goal of financial return, while monitoring closely the risk of financial loss caused by lack of diversification.

Charity trustee duties in Ireland

In Ireland, the Charities Regulator points to common law principles in stating the duties of charity trustees of all forms of charities, whether in the form of a trust, company or unincorporated association. Therefore, all charity trustees should be aware of the Butler-Sloss case, as an English law interpretation of these common law duties. It remains to be seen in future whether the Irish courts or Charities Regulator will adopt a similar interpretation.

In the meantime, the position remains that trustees of charitable trusts have a duty to safeguard trust assets through the pursuit of prudent investments that represent a positive financial return. In doing so, trustees should be guided by the best interests of the beneficiaries that the charitable trust exists to serve, as designated in the originating trust deed, rather than by personal preference or influenced by ethical considerations.

The Charities Regulator has published further guidance for charity trustees about investment of charitable assets in its Internal Financial Controls Guidelines for Charities.


All charity trustees are bound to act in the best interests of the charity they serve. This obligation extends to a duty to exercise due skill and care when investing charitable assets. Charity trustees must pursue investment choices that represent the best possible financial return on charitable property, while also taking care to act within the terms of their governing document to pursue their charity’s primary objects.

As a word of caution, it is vital that all trustees of charitable trusts understand and operate at all times within their scope of authority, as defined by the trust deed’s terms. A charity trustee who invests or agrees to the investment of money outside of the scope of their authority pursuant to a trust deed can be held personally liable for any subsequent loss.

For more information on the duties of charity trustees, speak to a member of our Charity and Not-for-Profit team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] Harries v The Church Commissioners for England [1992] 1 WLR 1241

[2] Sarah Butler-Sloss (as trustee of the Ashden Trust), Claire Birch (as trustee of the Ashden Trust), Grace YU (as trustee of the Ashden Trust), John Julian Sainsbury (as trustee of the Mark Leonard Trust), Mark Leonard Sainsbury (as trustee of the Mark Leonard Trust), Zivi Sainsbury (as trustee of the Mark Leonard Trust) v The Charity Commission for England and Wales, Her Majesty's Attorney General [2022] EWHC 974 (Ch).

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