Finance: Peacock hints at a commission rethink on ethicalinvestments

Ethical investment by charities does not have to be 'mission-related', Geraldine Peacock, chair of the Charity Commission, said last week.

Speaking at a Third Sector round table on ethical investment, the outgoing chair of the regulator said official guidance would soon be updated to take account of new thinking on the issue.

She moved to dispel the common notion that charities are permitted only to exclude 'unethical firms' that directly conflict with their own specific aims, as in the case of cancer charities and tobacco companies.

"There is a confusion that investments for charities are ethical or social only if they are mission-related, and that isn't necessarily the case," she said. "The trustees can do whatever they like, as long as it is in the best interests of the charity."

Current Charity Commission guidance on the subject states that charities can avoid investments that conflict with their aims. They can also avoid investments unrelated to their aims that might alienate supporters or beneficiaries, but they must balance the likely loss of support with the risk of financial under-performance. Many charities have felt inhibited from moving beyond strictly mission-related investment because of these caveats.

The Government's 2002 report into charity law reform recommended that the commission clarify the ability of charities to follow a "broad ethical investment policy", but Peacock indicated that the commission's thinking on the issue was changing radically.

"I think it has to change, because the world out there is changing fast," she said. "In the past, things were much more cast in tablets of stone.

"We've got a Bill, if it ever gets on the books, that is supposed to be creating a more flexible commission and a more flexible charitable world. We've got to get the language and the definitions right."

But Stephen Lloyd, chairman of the Charity Law Association, said he didn't think the commission had the power to override case law, such as the 1991 Bishop of Oxford case, on which its policy on ethical investment had been based.

"Peacock seems to be saying that long-accepted principles can be completely rewritten in the commission's brave new world," he said. "I don't think that's right, and I don't think the Charities Bill gives the commission the power to make completely new law rather than sensitively reinterpret current law. There is a subtle distinction between the two."

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