The value of investments and any income from them can fall and you may get back less than you invested.

Top ten tips for managing charity investments

Share

Lynne Lamont, Brewin Dolphin's Head of Charities for Scotland, shares her experience working with OSCR to publish Charity investments: Guidance and good practice. 

In the Autumn of 2017, I received an interesting email from OSCR, the Scottish Charity regulator, inviting me to participate in a reference group with the ultimate aim of developing a new piece of investment guidance for Scottish Charity Trustees. The group comprise OSCR staff, Board members, legal experts, charity representatives and investment professionals and the aim was to consider the legal requirements and best practice that charity trustees should consider when discussing, formulating and implementing their investment strategy. 

To date, there has been little guidance for the Scottish Charity Trustee on such matters. In England, the Charity Finance Group provide guidance on the construction of an Investment Policy Statement and the Charity Commission for England and Wales provides guidance on investment matters in document CC14. This information is of interest but not wholly relevant today particularly given the regulatory and legal differences between the jurisdictions.

Right from the start, there was an earnest desire to provide guidance that was practical and thoughtful. The aim was to set out the key points to consider if your charity has investments, or is thinking about investing and how your duties as charity trustees apply. It is intended to help charity trustees feel confident and informed as they approach this aspect of their charity’s finances. 

Starting with ‘What is an Investment?’, we went on to discuss why a charity should consider investing and how it should go about determining whether it could invest and, if so, were there any particular restrictions within the governing documents. We discussed the legal duties of Trustees as stated within the Charity and Trustee Investment Act (Scotland) 2005 and went on to consider how a charity can go about aligning the investment strategy to the charity’s purposes, looking at positive and negative screening, Environmental, Social and Governance factors and the pursuit of social and environmental as well as financial returns. 

Much thought was given to the importance of the Investment Policy Statement as a focal point for discussions and questions were provided to help prompt discussion and assist in the construction of the policy. Guidance is also provided on how to go about implementing the policy and how to engage professional assistance and review progress against objectives through time. 

The meetings were lively, the discussions well informed and at the end of the day, we were content that the guidance developed was accessible and proportionate. Below we have provided the ten key points as a useful summary; they are relevant to all trustees, in Scotland or anywhere else. The full guidance is provided on the OSCR website. 

Top ten tips for managing charity investments 

1. Understand your charity’s finances, including investments

All the charity trustees are collectively responsible for the charity’s investments and should have access to investment valuations and reports (not just the Treasurer or Finance/Investment Committee). 

2. Check your investment powers

Understand what, if anything, your governing document says about investments and any legislation relevant to your charity’s legal form. 

3. Know your charity trustee duties

You must make sure that any investment activities are in the best interests of the charity, weighing up the pros and cons before making a decision that could significantly impact the running of the charity. 

4. Consider your charity’s reputation

Your reputation is an asset to be protected. Charity trustees have a duty to act with care and diligence to protect a charity’s assets and reputation. 

5. Get help and advice if you need it

Consider what help or advice you need to support your charity in making decisions about its investments. 

6. Create an investment policy statement

It’s good practice for charity trustees to record policy decisions, keep them under review and include the information in your annual report and accounts. 

7. Think about your charity’s purposes

Consider how you connect your investments with your charity’s purposes and delivery of your strategy. 

8. Think about the range of investments

Understand there are different kinds of returns, measured in different ways: financial, social, environmental or otherwise – think about what is right for your charity. 

9. Understand your responsibilities

You may have power to delegate investment decisions to an investment manager, but you retain overall responsibility. 

10. Keep up to speed

Stay up to date with investment developments through events, seminars and other training.

 

You may also find it helpful to visit the websites of one of the charity regulators in the UK or Ireland:

England and Wales: www.gov.uk/charity-commission

Scotland: www.oscr.org.uk

Northern Ireland: www.charitycommissionni.org.uk

Republic of Ireland: www.charitiesregulator.ie

 

The value of investments and any income from them can fall and you may get back less than you invested.
Past performance is not a guide to future performance.
The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.
No investment is suitable in all cases and if you have any doubts as to an investment’s suitability then you should contact us. 
If you invest in currencies other than your own, fluctuations in currency value will mean that the value of your investment will move independently of the underlying asset.
The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd.