Clarify 'outdated' ethical investment law, charity tribunal urged

An open letter from a group of charities and law firms says the current rules are at risk of being misinterpreted by trustees

A group of major charities and law firms have called for the charity tribunal to clarify whether ethical investment law for charities should be reformed, amid concerns that it is "seriously outdated and insufficient".

An open letter signed by groups including the RSPB and the Joseph Rowntree Charitable Trust calls on the Attorney General and the Charity Commission to make a referral to the charity tribunal in order to test whether charities should be legally obliged to ensure their investments support their charitable goals.

The letter comes after a number of controversies about charities that have invested in companies conducting activities that are antithetical to the charity’s aims, such as the Church of England’s investments in the payday loan firm Wonga, which the church ended in 2013.

The letter says: "Until charity trustees are at the very least encouraged to review consistency between their charity’s objects and choice of investments, there is a real risk that more charities will be subjected to this level of public scrutiny and stories of this kind will continue to damage public trust and confidence in charities and draw accusations of hypocrisy and inconsistency."

The letter also seeks a ruling to commit charities to avoiding investing in companies that contribute to climate change, such as the fossil fuels industry.

Existing law, the letter says, is at risk of being misinterpreted by trustees and a definitive ruling is needed to ensure that charities have the correct investment policies in place.

Other signatories to the letter include Nesta, the Ashden Trust, the environmental law firm ClientEarth, the Ecumenical Council for Corporate Responsibility and Quakers in Britain.

Luke Fletcher, a partner at the law firm Bates Wells Braithwaite and author of the letter, said: "Members of the coalition have a real commitment to seek a landmark judgment on responsible investment. They believe the Charity Commission should take the lead by making a reference to the tribunal itself.

"However, the coalition is determined to explore every avenue available to obtain legal clarity for trustees, and there is always the option of seeking a declaration from the courts on their own initiative if the commission does not make a reference directly."

Lord Williams of Oystermouth, the former Archbishop of Canterbury, said: "Investment policy has become a crucial area of moral debate at a time when we are at last recognising the urgency of issues around climate change.

"It is now of real importance that charity law should be clarified in a way that acknowledges the need to align investment practice with the imperatives of responsibility to and for our global environment."

Rebecca Fry, head of legal policy at the Charity Commission, said she welcomed the letter on the "important issue" of ethical investment.

"We agree that public attitudes to the broad issue of ethical investment by charities have moved on and we are sympathetic to calls for greater clarity for trustees," she said.

"However, a reference to the tribunal could be costly, time-consuming and its outcome, by definition, uncertain.

"There are other options to consider which might achieve a better outcome and greater clarity and confidence in the scope trustees have for investing their charity’s money in line with their purposes, ethos and values."

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