Charities can make climate-friendly investments even if it means lower returns, High Court rules


Trustees can consider climate change factors when making decisions over their charity’s investments even if it means making lower returns, the High Court has ruled. 

Trustees of the grant-makers the Ashden Trust and the Mark Leonard Trust had brought the case before the court in early March and the judgment was released on Friday. 

The ruling reinterprets a 30-year old judgment, known as the Bishop of Oxford case, which found that charity trustees should maximise return on their investments except in circumstances where it conflicted with its purposes. 

But in the latest case, Justice Michael Green approved investment policies drawn up by the two charities that excluded investments that were considered to contribute to climate change.

He ruled the power to invest must be exercised to further a charity’s purposes, which would normally mean maximising the financial returns on any investment. 

But he found trustees had a discretion as to whether to exclude investments which they reasonably believed were in conflict with their charity’s purposes. 

The Charity Commission, which along with the Attorney General was a defendant in the case, said it welcomed the judgment and would publish revised CC14 investment guidance in the light of the decision. 

Sarah Butler-Sloss, founder of the Ashden Trust, said: “I’m delighted the High Court endorses our view that investments not aligned to the goals of the Paris Agreement conflict with our charitable work to alleviate poverty and protect the environment. We can now exclude them from our portfolio. 

“This judgment empowers trustees of other charities that care about the state of the planet and all its inhabitants to invest in a way that mitigates the worst impacts of climate change.”

Mark Sainsbury, founder of the Mark Leonard Trust, said the judgment marked a milestone in defining the fiduciary duties of charity trustees. 

“For too long, responsibilities in this area have been a source of uncertainty and differing advice and it’s been too easy for trustees to ignore the tension between their charitable purposes and certain investments,” he said. 

“There can now be no doubt that all charity trustees need to weigh up financial return against any potential conflicts with their aims and work”

Luke Fletcher, a partner at the law firm Bates Wells, which represented the two trusts, said: “Charity trustees are now clearly empowered to give full weight to concerns arising from climate impacts and other harms caused by investments when deciding how to invest.”

“This ruling clarifies the law and redefines fiduciary duty, in the light of climate change and more broadly, for the benefit of all charities. 

“It is also likely to be influential in other jurisdictions and will be of interest to other categories of investors.”

He said that although the commission would be publishing revised investment guidance, the ruling sets out the law, which has priority over guidance, and would apply to all trustees immediately.

Aarti Thakor, director of legal services at the Charity Commission, said: “We are pleased that the judge found, in line with our proposed guidance, that trustees can continue to have wide discretion when choosing to invest ethically.

“The judge confirmed that the law relating to trustees’ powers of investment should be suitable for all types of charities, offer flexibility and sustainability, and ensure the furtherance of a charity’s charitable purposes. 

“We will be publishing our updated guidance in due course to ensure trustees can confidently adopt appropriate policies including in the context of pressing concerns around climate change.”

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