Charity Finance Group (CFG) has said that a set of principles for trustees to use when making decisions about their charity investments will be launched this autumn.
Yesterday, delegates at CFG’s annual conference heard about the Charity Investment Governance Principles, a project hosted by CFG and led by independent consultant Gail Cunningham.
CFG previously said that the project would “explore best practice in decision-making around charity investments” and reflect the outcomes of the Butler-Sloss case.
The project’s steering group also includes representatives from the Association of Charitable Foundations, NCVO, Wales Council for Voluntary Action and Secretariat of the Charities Responsible Investment Network.
‘Tricky’ to find specific help on investment governance
In a panel discussion, Cunningham said “it can be quite tricky to find specific help on investment governance, particularly when it’s an area where some trustees might have a huge amount of expertise and some are absolutely terrified”.
She said the upcoming charity investment governance principles, which will be hosted on a standalone website, will be complimentary to the Charity Governance Code and will not replicate what is already out there.
Each of the seven principles, similar to the Charity Governance Code, will have a description, rationale, key outcomes and recommended practice.
Charities will be able to “see” and “select” on the website what they need depending on their sizes and types of investment, for instance.
The website will also have examples, explainers, sources of help and standalone sections including one for charities that mainly invest cash.
The principles are as follows:
- Purpose of investment (legal and practical considerations).
- Leadership (governance, structure and delegation framework).
- Integrity. This is where the Butler-Sloss case comes into play: How can charities avoid conflicts with their purposes? How do they avoid reputational risks? How do trustees place their charities’ purposes at the forefront of their investments?
- Decision making (risk and control). This looks at things such as how charities work with external providers and investment policies.
- Effectiveness (recruiting the right trustees).
- Equity, diversity and inclusion.
- Openness and accountability. This is around what information charities publish, and builds on the SORP and other things they might want to consider.
Sector needs to know what good practice looks like
Also speaking at the conference, Luke Fletcher, partner at Bates Wells & Braithwaite, said that “investment governance has been something of a black box” because of variable practice across the charity sector and no “established sense of what best practice looks like”.
“When clients are asking: ‘How should we form our investment committee? How should we review our investments? What should we be thinking about?’ Historically, there hasn’t really been very good things to point to,” he told delegates.
“You’ve got CC14, which is a legal and regulatory document, but it’s not that practical. It doesn’t really get into practical things like how regularly should you review, or how do you review, performance, or how do you think about impact.”
Fletcher said that looking at the Charity Governance Code, there is an opportunity to identify and articulate what good practice looks like and develop consensus.
Principles designed to empower trustees
Fletcher added: “On the investment governance side, there always seems to be a bit of a gap. It’s important that we’re talking about charity investment governance. It’s not charity investments, it’s about the government around those investments.
“I’ve always felt that perhaps trustees have felt a bit disempowered as if they need to delegate this to professionals and leave it to them. That tends to mean that city voices dominate how these decisions are made.
“So, the charity investment governance principles project is, in a way, an effort to empower trustees to say: ‘All trustees should be asking these questions, thinking about these things and have something to say.’”
An open consultation on the principles is expected to launch next month. Feedback will then be incorporated in August or September before the principles are introduced in the autumn.
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