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New guidance launched on Charity Investments

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Finally it’s here – our brand new guidance and good practice on charity investments

Charities of various shapes and sizes invest their money and those investments can take a range of forms – cash placed on deposit, an investment portfolio or an investment that has social and ethical considerations and returns for the charity.  Increasingly the charity sector is making more use of investments and we have developed this guidance to help support charities in this sometimes tricky area of their work.

This guidance is written specifically for Scottish charities because the law in relation to charity investments is different in Scotland compared to that in the rest of the UK. 

In my experience of working with charities, any matter related to the finances often leads many charity trustees feeling out of their depth and unable to contribute to discussions.  However when making decisions about what to do with the charity’s money it is important that charity trustees are able to understand the choices they have, the possible risks attached to those choices and the implications of the decisions they may take.

What does the guidance cover?

The new guidance starts off by looking at where the power for charities to invest comes from, which depends on the charity’s legal form.  It is important for charity trustees to be sure that they have a power to invest the charity’s funds before going any further.

Next we look at the legal duties of charity trustees and how they apply in relation to investments.  Charity trustees must always meet their legal duties and in the guidance we provide practical examples and good practice tips that can help trustees to achieve this.

The guidance then looks at other factors that trustees may wish to consider when making investment decisions.  The decision isn’t always just about how much money the charity could earn– sometimes a charity may wish to align its investment choices to the purpose of the charity itself so that the investment contributes to a non-financial objective such as a social or ethical aim.   

Once trustees have decided what they want to achieve from investments and what the critical factors are they can develop an investment policy statement. Our guidance has a step by step guide to help trustees consider the various components they could include in the policy statement.

The guidance rounds off by looking at the information about charity investments that must be included in the annual reports and accounts of charities with an income of £500,000 or more based on the requirements of the Charities SORP.

The development of the guidance

We are very grateful to Julie Hutchison of Standard Life Wealth for her assistance in developing this guidance and the members of our external Reference Group who gave us lots of food for thought during the project!  We hope trustees will find this guidance useful in making good investment decisions that are right for their charity, recognising that needs can change over time and so these decisions need to be reviewed on a regular basis.