Regulator asked to amend ethical investment guidance over fossil fuels

A charity law expert says investment in fossil fuels could conflict with some charities' activities and has called on the Charity Commission to revise its guidance

Lawyers are calling on the Charity Commission to amend its guidance to advise charities to divest from the fossil fuels industry if their work could be affected by climate change.

The charity law expert Christopher McCall QC has advised that investment in carbon-intensive assets, such as fossil fuels, could be irreconcilable with some charities’ activities, such as those covering environmental, general health and poverty issues.

McCall, who was asked by the law firm Bates Wells Braithwaite to advise on ethically questionable investments, said charity trustees should consider how to manage and mitigate any financial risks posed by fossil fuel investments.

This means that where rising global temperatures could undermine a charity’s work, it should consider avoiding fossil fuel investments, in the same way that many charities avoid industries such as tobacco, armaments and pornography.

Bates Wells Braithwaite has written to the Charity Commission asking it to update its investment guidance to reflect McCall’s analysis.

Luke Fletcher, partner and head of social finance at BWB, said charities needed to re-evaluate their investment strategies.

"Charity investors are different to other investors. Instead of existing to further their own interests, charities exist to benefit the public – which is relevant to how charities invest," he said.

McCall’s opinion broke new ground, Fletcher said. "Charity boards will now need to ask whether fossil fuel investment represents a risk to mission – given the prospect of dangerous increases in global temperatures."

McCall’s conclusion cites the 1991 case in which the Bishop of Oxford challenged church commissioners on their investments in companies with interests in apartheid-era South Africa. Following the case, the Charity Commission revised its guidance on ethical investment.

Fletcher told Third Sector that the comprehensive scientific evidence about climate change that had emerged since the Bishop of Oxford case meant the guidance should be updated.

He added that for fossil fuels, the question charities had asked until now had been whether they could divest rather than whether they should do so.

But Fletcher said the commission was unlikely to revise its guidance before the Charities (Protection and Social Investment) Bill passed through parliament next year.

The commission confirmed it had received BWB’s letter and would take a view in due course.

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