These could include investment portfolios or holdings in pooled investment funds. Such assets may deliver an invaluable income stream to help further your charitable aims and objectives particularly in an era of low interest rates available from cash deposits.

If so, the Charity Commission expects trustees to adopt a suitable investment policy bespoke to their aims and objectives. Within this policy, trustees may also wish to implement an ethical investment policy. If you employ investment managers they are also required to adhere to your investment policy. 

What should go into an investment policy? 

This will vary from charity to charity but examples can include:

• Investment Objectives (growth, income or both, known as a ‘total return’)

• Scope of the charity’s investment powers with restricted and unrestricted funds

• Risk profile – how the charity could cope with potential capital fluctuations 

• Time horizon – are these long or short-term investments?

• Liquidity needs – do some assets need to be always available for unforeseen contingencies?

• Ethical considerations and exclusions if necessary

• Reporting & Monitoring - benchmarks for future reviews 

• Investment Management – signatory lists for transactions

• Investment Policy Review Frequency – could this be annually or quarterly for example?

Ethical Criteria

Some investments may not be compatible with a charity’s aims and objectives. For example, a cancer relief fund may find that holding tobacco company shares for a dividend income could represent a conflict. Moreover, such areas of investment could simply be deemed as unacceptable to donors, potential donors or the press. Some high-profile charities have experienced serious reputational issues from not getting this right in recent years. Wouldn’t you want to make sure your charity is cited in the press for the right reasons, not the wrong ones?

When was yours last reviewed or updated?

As well as the requirement to review investments on a regular basis, it is also good practice to review your investment policy to ensure that it is up to date and relevant to your charity’s aims and objectives. Trustees should also ensure that any investments held continue to adhere to the policy including any ethical criteria adopted. 

At Thomas Westcott Chartered Financial Planners we have significant experience in this field.  We provide advice on charity investment policies and have a professional team dedicated to monitoring the marketplace of charitable investment solutions. If we can help your board to understand these matters we would be very pleased to talk to you.  

 

By Simon Lake, Chartered Financial Director