Investments

Trustees are responsible for maximising the financial return on the charity’s investments while minimising the charity’s exposure to risk.

Investments include shares, rental, lease of land, loans and units in collective investment schemes. Investments do not include the process of purchasing items such as land for future sale which are more accurately described as trading.

Trustees’ investment powers vary depending on whether their charity is unincorporated or whether their charity is a company:

• The Trustee Act 2000 applies to unincorporated charities and gives trustees a wider power of investment
• The investment powers of companies and IPSs are set out in the governing documents – the Trustee Act 2000 does not apply.

In managing investments, trustees must comply with their legal responsibilities. Trustees should bear in mind:

• The long term future of the charity – protecting capital from inflation, diversifying investments (spreading investments to reduce the risk attached to a single investment) and avoiding speculative or risky investments
• Their duty to obtain impartial, written advice when investing funds, from someone whom they are satisfied has experience of investment matters
• Their powers to invest as set out in the governing document and in law
• Commission guidelines around socially responsible investment (an investment approach linked to a charity’s objects or purposes).
• The statutory duty of care under the Trustee Act 2006

Investment law is complex. Trustees should consult the Charity Commission’s guidance and seek professional advice if they are unsure.