Early this year, a new resource was published, designed to assist trustees and staff involved in governance decisions around charity investments.
The Charity Investment Governance Principles (CGIP) were developed by a Steering Group (including Charity Finance Group, Association of Charitable Foundations, National Council for Voluntary Organisations, Wales Council for Voluntary Action, Secretariat of the Charities Responsible Investment Network), who consulted over 100 charities, alongside input from lawyers, accountants, investment managers and advisers.
Their research discovered that many charity trustees and staff do not have sufficient confidence to manage their investments to best effect, and they fear making mistakes that could damage their organisation’s position. Ill-considered investments risk losing funds, conflicting with charitable purposes, or affecting reputation.
Luke Fletcher, partner at law firm Bates Wells, says:
‘The principles provide practical, actionable guidance that empowers trustees and charity leaders to make informed, confident decisions about investments.’‘
How to use the CPIG
It’s likely that some charities will already be practicing many of the principles already; for others, some of the recommendations will be a best practice to work towards.
The CGIP are not a legal or regulatory requirement; the Charity Commission’s Investing charity money: guidance for trustees (CC14) covers this. The principles are more intended as a tool to provide additional support on how to invest and how to manage reserves once they are invested.
The CGIP have been written with charities of all sizes in mind, although it’s worth considering that the size of the organisation will likely determine the span of their investments and how they are held. Smaller charities (with under £1 million in assets) that mainly invest in cash have their own section of the guidance.
Each principle includes a description and explanation of importance, key outcomes, and suggested practice on how to implement the guidance. There are also additional resources, such as explainers, checklists, alongside links to examples and further help.
What are the principles?
Below we have briefly outlined the principles. We suggest that you check them out in more detail on the CPIG website for further insight…
1. Purpose of Investments
Most investments will be made to ensure the ongoing sustainability of a charity, to hold reserves or generate further funds. A trustee board must have clarity on how their charity’s investments further its purposes, with regard to their practical and legal management.
2. Leadership
Although managing investments is primarily the responsibility of the charity board, in practice there may be a range of individuals internally who have a delegated role in this stewardship. Leadership, supported by a strong governance structure, must be present to ensure there is proper resources and expertise available.
3. Integrity
All charity activities, including making investments, should support and further the charity’s purposes. Consequently, trustees, staff, and committee members must understand how investments interact with purposes. Effective internal communication is vital to avoid reputational risks and conflicts of interest.
4. Decision-making, Risk & Control
Systems should be established to manage investments effectively. This should assist those involved with management so all parties, even those outside the organisation such as investment advisers, are working in alignment with the proper tools and information at their disposal. It’s the board’s role to oversee these decision-making systems and therefore prevent potential difficulties.
5. Effectiveness
Many charities will not have a specific person who has expertise in investment. However, a trustee board must be confident that those people managing investments in or for their organisation have the necessary skills, experience and knowledge to fulfil their responsibilities. This relies on effective working relationships.
6. Equity, Diversity & Inclusion
Equity (equality), diversity and inclusion must be regarded in all matters. An inclusive approach, where different voices are heard, and the views of different stakeholders are considered should inform your investment policy.
7. Openness & Accountability
All charities deliver their purposes for public benefit. Openness, transparency, and accountability build trust and confidence in the charity. This is particularly important amongst increased sector scrutiny and stringent regulations. Maximising your organisation’s reputation in this way and will also increase the likelihood of donations and support.
Need some guidance?
Burton Sweet has a longstanding commitment to charities and civil society organisations, offering practical, professional and passionate support. We want to assist you, so you can deliver effectively for the communities you serve and show the good you do.
If you require guidance on how to invest effectively and how to manage these investments to best advance you charity purposes, please contact us. Our charity sector specialists will be happy to assist you…
