Legal Clarity for Charities as Responsible Investors

Congratulations are due to Bates Wells for clarifying the law about responsible investing, alongside its clients, the Ashden Trust and the Mark Leonard Trust.

Bates Wells acted for these two charities who wanted confirmation of their ability to include climate change (as represented by the Paris Agreement) as a factor when designing their investment policy. Until now there had been some doubt as to the degree that this was allowed, but thanks to a new Judgement in the High Court, the law (which had dated from the old Bishop of Oxford case in 1992) has now been updated.

This is welcome news, and doubtless there will be much expert commentary on its significance. However, it would be a real shame not to pay homage to the clarity of the language used in the Judgement. For instance, this was the basic question (in paragraph 1): 

“Should charities, whose principal purposes are environmental protection and improvement and the relief of poverty, be able to adopt an investment policy that excludes many potential investments because the trustees consider that they conflict with their charitable purposes?”

The Judgement goes through a series of legal arguments before including this absolutely perfect statement summing up the relationship between trustees and their investments (in s. 78.9):

“Essentially, trustees are required to act honestly, reasonably (with all due care and skill) and responsibly in formulating an appropriate investment policy for the charity that is in the best interests of the charity and its purposes.”

So it is great news to have clarity on this point of law for all charity lawyers to reference, but it is even greater news for the rest of us to have it available in such limpid language as is used by the Honourable Mr Justice Michael Green. Thank you to all involved in this landmark ruling. 

We are always on hand to guide your charity with its particular needs for responsible investment. Contact Yoke for an initial discussion.