Charities and Ethical Investment - Butler-Sloss and Others v Charity Commission and Another
On 29 April 2022 the High Court handed down its judgment in the case of Butler-Sloss and others v Charity Commission and another.
The case was brought by trustees of The Ashden Trust and The Mark Leonard Trust, charities whose principal purposes are the preservation of the environment and the relief of poverty. The trustees sought and received the Court's blessing to adopt new investment policies, which require the investment portfolios to be aligned with the goals of the Paris Agreement - keeping long term global warming well below 2°C and preferably 1.5°C.
In making its decision, the Court considered and clarified aspects of the decision made in the Bishop of Oxford case, Harries v Church Commissioners for England [1992] 1 WLR 1241, some 30 years ago, confirming that:
- trustees could choose not to make investments directly contrary to their objects
- it was a discretion, to be exercised where trustees are of the reasonable view an investment may potentially conflict with the charity's objects
- in exercising this discretion, trustees must consider the likelihood and seriousness of both the conflict and the financial effect on a properly informed basis
The Court was presented with, but declined to approve step-by step the building blocks of the decision. So there is no detailed description of the practical steps by which trustees should establish a suitable investment policy. However, the judgment includes (at paragraph 78) a concise statement of the law that applies where charity trustees take into account non-financial considerations when exercising their powers of investment.
If your charity is:
- increasing its focus on environmentally responsible investment,
- considering other ESG (environmental, social or governance) issues in investing, or
- reviewing other aspects of its investment policy,
the Butler-Sloss judgment provides a helpful summary of the law.
Further guidance should soon be available from the Charity Commission. In 2021, the Charity Commission consulted on draft guidance on responsible investment. It delayed finalising the guidance pending the judgment in this case. The Charity Commission has welcomed the judgment and confirmed that it will be publishing updated guidance.
We explore the implications of this judgment in more detail in an article for the June issue of Governance and Compliance, the magazine of The Chartered Governance Institute UK. That article will be republished here in July.