Some aspects of the Charity’s Commission’s new CC14 investment guidance represent “a backward step from the previous guidance on social investment”, according to the investment director at Rathbone Greenbank Investments.

In stark contrast to the Charity Commission’s contention that the new draft guidance makes clear that the Commission will allow investments that don’t necessarily maximise financial returns as long as they further the charity’s mission, Mark Mansley (pictured) states that the section on social investment “almost seems designed to deter charities from making programme-related investments (PRIs)”.

Writing in Charity Finance this month, Mansley describes the guidance as “very complex and somewhat confusing” and says an opportunity to develop some clear and simple principles has been missed.

He says that although the section on PRI is the biggest change to the guidance, there is still insufficient encouragement and “in many ways it represents a backwards step from the previous guidance on social investment”.

Last year, government ministers Francis Maude and Nick Hurd told the Commission it needed to clarify its stance on social investments to give charities more leeway to pursue them. But Mansley argues that the new CC14 largely fails to do this.

He says that the emphasis that is placed on considering any private benefit that may arise from making a PRI will, “at best, add another bureaucratic step to any charity seeking to invest in PRIs, and at worst may lead to many deciding that PRI is too complex”.

He also stated that the draft omits to mention the idea of ‘social return’ in evaluating and assessing PRIs, despite government and sector support for the concept. “Without recognition of social return as a concept, it is difficult to see how mixed-purpose investment can be easily managed and adopted.  Thus the minister is likely to be disappointed in his hopes that the billions in philanthropic organisations should be allowed to be used to generate mixed returns.”

Mission-connected investment and mixed-purpose investments are expanded upon in the updated guidelines, reflecting the growth of these practices over the last decade, but Mansley points out that responsible investment is notably absent even though it has gained popularity from mainstream investors recently. This “will mean charity investment is missing out on some of the most progressive ideas in investment”.

He concludes: “While those content to take a relatively conventional approach to investment may be unaffected, those that are seeking to pioneer new approaches are likely to find themselves chafing against the constraints of the guidance.”

Mansley urges readers to respond to the consultation on the guidance which is open until 28 February on the Charity Commission website.  

• Read Mark Mansley's article New investment guidance here.