皇冠体育app

In 1992 the Bishop of Oxford challenged the Church Commissioners over their investment policy (Harries v 皇冠体育app Church Commissioners for England [1992] 1 WLR 1241). In particular, he sought a declaration that the Church Commissioners in exercising their investment powers were obliged to have regard to the object of promoting the Christian faith and thus to apply ethical consideration to their choice of investment. 皇冠体育app Vice-Chancellor considering that case summed up the responsibilities of charities with regard to investment very succinctly:

Most charities need money; and the more of it there is available the more the trustees can seek to accomplish.

Thus the purposes of the charity are usually 鈥渂est served by the trustees seeking to obtain therefrom the maximum return, whether by way of income or capital growth which is consistent with commercial prudence鈥�.

However, he recognised that 鈥渋n a minority of cases the position will not be so straightforward.鈥� 皇冠体育appse were cases 鈥渨hen the objects of the charity are such that investments of a particular type would conflict with the aims of the charity鈥�. Examples were cancer research charities and tobacco shares, trustees of temperance charities and brewery and distillery shares, and trustees of charities of the Society of Friends and shares in armaments companies.

皇冠体育app Vice-Chancellor also identified another category of case where trustees鈥� holdings of particular investments 鈥渕ight hamper a charity鈥檚 work by making potential recipients of aid unwilling to be helped because of the source of the charity鈥檚 money, or by alienating some of those who support the charity financially.鈥�

皇冠体育app Vice-Chancellor made clear that the greater the risk of financial detriment the clearer the trustees needed to be of the advantages to the charity of the course of action they were adopting.

皇冠体育app case also made clear that trustees 鈥渕ust not use property held by them for investment purposes as a means for making moral statements at the expense of the charity of which they are trustees.鈥�

This case was decided twenty two years ago. Have there been developments in the law since that time? 皇冠体育appre have certainly been no significant legal cases on the issue of ethical investment since that time. Accordingly, in terms of the obligations of charity trustees with regard to the process of ethical investment, this remains the leading case.

皇冠体育app case does state the issue of ethical investment in permissive terms. Trustees may invest on ethical lines in certain situations. 皇冠体育app tone is that this will be comparatively rare. Trustees can make ethical investments if there is no financial detriment. That said, the Harries case certainly envisages situations in which ethical investment is an imperative not an option such as where investment will be in contradiction of their objects or where certain investments hamper the work of the charity.

What may well have changed is the public perception of charities and what they should be doing. 皇冠体育app Harries case envisaged that there would be rare cases when a charity depending on donations would need to avoid certain investments which were likely to alienate their donors. It may be that now there is more of an expectation from the public that ethical investment is a good thing and that they are more likely to support charities that take such an approach. Accordingly, charities dependant on public support are well advised to take very seriously the words of the Vice-Chancellor:

鈥�trustees will need to balance the difficulties they would encounter or likely financial loss they would sustain if they were to hold the investments against the risk of financial detriment if those investments were excluded from their portfolio.

That this may now be a more common occurrence than before reflects the move towards encouraging more social responsibility generally. Thus, in the Companies Act 2006 there is a requirement on directors of companies, including charitable companies, in complying with their duties to have regard to 鈥渢he impact of the company鈥檚 operations on the community and the environment鈥� and 鈥渢he desirability of the company maintaining a reputation for high standards of business conduct鈥�.

Further, trustees can always take into account well-established ethical criteria provided that trustees discharge their investment powers in accordance with their duties regarding diversification and suitabilityand there is no financial detriment to the income of the charity which arises from applying those criteria.