Trustee investment policy: Butler-Sloss & Ors

Not specifically “law and religion” – but the powers and duties of charity trustees apply equally to trusts for the advancement of religion as to trusts for other purposes.

In Butler-Sloss & Ors v The Charity Commission for England and Wales & Anor [2022] EWHC 974 (Ch), the trustees of two charities – the Ashden Trust and the Mark Leonard Trust, whose principal purposes were environmental protection and improvement and the relief of poverty ­– sought clarification on whether they could adopt an investment policy that excluded many profitable potential investments which they considered would conflict with their charitable purposes. The effect of the only leading case in that area – Harries v Church Commissioners for England [1992] 1 WLR 1241, aka the Bishop of Oxford case, which concerned the Church of England’s investment policy in relation to South Africa – was unclear [1]: there is a helpful note on Harries here.

The trustees sought the Court’s approval for the adoption of their proposed new investment policies to ensure that they were acting lawfully. They also sought a series of declarations as to the proper approach to be taken in relation to such issues generally by charity trustees [3]. Their proposed policy criteria for an investment were whether it was aligned with the Paris Climate Agreement of April 2016 [6].

The Charity Commission for England and Wales and the Attorney General invited the Court to deliver a judgment that set out the correct approach in law for charity trustees to follow in considering adopting an ethical or responsible investment policy but argued that it was premature for the Court to approve the trustees’ proposed investment policies based on the available evidence [4].

At [78], Michael Green J summarised what he considered to be the law in relation to charity trustees taking non-financial considerations into account  when exercising their powers of investment, as follows:

“(1) Trustees’ powers of investment derive from the trust deeds or governing instruments (if any) and the Trustee Act 2000.

(2) Charity trustees’ primary and overarching duty is to further the purposes of the trust. The power to invest must therefore be exercised to further the charitable purposes.

(3) That is normally achieved by maximising the financial returns on the investments that are made; the standard investment criteria set out in s.4 of the Trustee Act 2000 require trustees to consider the suitability of the investment and the need for diversification; applying those criteria and taking appropriate advice so as to produce the best financial return at an appropriate level of risk for the benefit of the charity and its purposes.

(4) Social investments or impact or programme-related investments are made using separate powers than the pure power of investment.

(5) Where specific investments are prohibited from being made by the trustees under the trust deed or governing instrument, they cannot be made.

(6) But where trustees are of the reasonable view that particular investments or classes of investments potentially conflict with the charitable purposes, the trustees have a discretion as to whether to exclude such investments and they should exercise that discretion by reasonably balancing all relevant factors including, in particular, the likelihood and seriousness of the potential conflict and the likelihood and seriousness of any potential financial effect from the exclusion of such investments.

(7) In considering the financial effect of making or excluding certain investments, the trustees can take into account the risk of losing support from donors and damage to the reputation of the charity generally and in particular among its beneficiaries.

(8) However, trustees need to be careful in relation to making decisions as to investments on purely moral grounds, recognising that among the charity’s supporters and beneficiaries there may be differing legitimate moral views on certain issues.

(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. Where there are difficult decisions to be made involving potential conflicts or reputational damage, the trustees need to exercise good judgment by balancing all relevant factors in particular the extent of the potential conflict against the risk of financial detriment.

(10) If that balancing exercise is properly done and a reasonable and proportionate investment policy is thereby adopted, the trustees have complied with their legal duties in such respect and cannot be criticised, even if the court or other trustees might have come to a different conclusion.” [emphasis added.]

He concluded at [88] that the claimants

“have exercised their powers of investment properly and lawfully, having taken account of all relevant factors and not taken into account irrelevant factors. I believe that the decision to adopt the Proposed Investment Policy is sufficiently ‘momentous’ to justify the Court giving its blessing to that decision and I therefore make the declaration that is sought in the adjusted wording of declaration 9 in the draft Order. That is in the following terms, with my amendments:

‘The trustees of the Charities are (a) permitted to adopt [the Proposed Investment Policy] and (b) that doing so will discharge their duties in respect of the proper exercise of their powers of investment’.”

Cite this article as: Frank Cranmer, "Trustee investment policy: Butler-Sloss & Ors" in Law & Religion UK, 2 May 2022, https://lawandreligionuk.com/2022/05/02/trustee-investment-policy-butler-sloss-ors/

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  1. Pingback: What’s Your Nonprofit Doing to Fight Climate Change? – Nonprofit Law Blog

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