“Can you invest your reserves without compromising what your charity stands for?” 

It’s a great question, and one that’s becoming increasingly common. 

Let’s be honest, most trustees don’t join a charity board because they’ve always dreamed of discussing investment policy over milky tea. They join because they care about the cause. 

But whether you’re helping vulnerable people, protecting wildlife or supporting your local community, there comes a point when every trustee board has to ask: “Is our money working as hard as we are?” 

Many charities work incredibly hard to raise funds, yet once those funds are received, the focus often shifts to protecting them rather than making them work. Holding reserves is good governance, but if those reserves are sitting in cash for years, inflation quietly chips away at their value. Unfortunately, unlike enthusiastic volunteers, money doesn’t work harder simply because you ask it nicely. 

Today’s trustees of Charities are expected to balance financial stewardship with public trust, and that’s where a well thought out investment strategy becomes so important. 

Charity Trustees Are Stewards, Not Just Decision-Makers 

One of the things I enjoy most about working with charities is seeing the passion trustees bring to their roles. Most give their time voluntarily, juggling board papers alongside careers, family life or maybe giving up their hart earner retirement for the greater good. 

But with that passion comes responsibility. 

The Charity Commission is clear that trustees must act in their charity’s best interests and ensure its assets are managed responsibly. Investments are no exception. 

Whether your charity has £250,000 or £10 million to invest, trustees should be able to demonstrate that decisions have been made carefully, taking account of risk, return and the charity’s objectives. 

The Commission’s guidance, CC14 – Charities and Investment Matters, encourages trustees to take a structured approach to investing. That means understanding why you’re investing, what level of risk is appropriate and how those investments support the charity over the long term. 

For me, that’s where good financial planning and good governance meet. 

As a Charity Trustee, It’s No Longer Just About Maximising Returns 

Years ago, investment discussions often centred on one question: 

“Which investment is likely to deliver the highest return?” 

Today, the conversation is much broader. 

Charity Trustees are increasingly asking: 

• Does this investment reflect our values? 

• How would our supporters feel if they knew where our money was invested? 

• Could this damage our reputation? 

• Are we balancing financial returns with our wider charitable purpose? 

They’re exactly the questions trustees should be asking. After all, explaining why an environmental charity owns shares in a major oil company is rarely the highlight of the annual general meeting. 

A cancer charity should not feel comfortable investing in tobacco companies. An environmental charity may choose to avoid businesses heavily reliant on fossil fuels. Similarly, a humanitarian charity would be unlikely to invest in armaments as it simply doesn’t align with its mission. 

These decisions are about being consistent. 

The Butler-Sloss Case Changed the Conversation 

An important milestone came in 2022 with the UK Supreme Court case Butler-Sloss v Charity Commission. 

The judgment confirmed that trustees of a charity can adopt ethical investment policies, even where those policies may exclude investments with potentially higher financial returns, provided they reasonably believe doing so is in the charity’s best interests. 

In practice, this means charity trustees are entitled to consider more than just investment performance. 

They can also take account of: 

• Whether an investment conflicts with the charity’s purposes. 

• The expectations of donors and beneficiaries. 

• Potential reputational damage. 

• The impact on public trust and confidence. 

From my perspective, this was an important clarification. It recognised something many charities had already understood, that protecting a charity’s reputation is every bit as valuable as protecting its investment portfolio. 

Ethical Investing Doesn’t Mean Giving Up Performance 

One of the biggest misconceptions I still hear is that ethical investing inevitably means lower returns. 

That does not need to be the case. 

There are now thousands of investment funds that incorporate ethical or Environmental, Social and Governance (ESG) considerations while still aiming to deliver competitive long-term returns. 

Of course, excluding certain sectors may reduce the investment universe, and no investment strategy can guarantee better performance. Investing remains a marathon, not a sprint and certainly not something to judge after checking the markets over your morning coffee. 

The objective isn’t perfection, it’s finding the right balance between financial sustainability and organisational values. 

Every Charity Trustee Should Have an Investment Policy 

If I could encourage every trustee board to do one thing, it would be this: review your investment policy. 

Too often I see investment decisions evolve over time without anyone stepping back to ask whether the overall strategy still reflects the charity’s objectives. 

A good investment policy doesn’t need to rival War and Peace in length. In fact, shorter and clearer is usually better. 

It should answer some straightforward questions: 

• Why are we investing? 

• When will these funds be needed? 

• How much risk are we prepared to accept? 

• Are there sectors we wish to avoid? 

• Should ESG considerations form part of our investment process? 

• How will we measure success? 

Having these conversations before making investment decisions usually leads to better outcomes, and shorter trustee meetings, which is something everyone can support. 

How a Financial Adviser Can Help 

For many Charity trustee boards, the challenge isn’t understanding why an investment strategy is important, it’s finding the time, expertise and governance framework to develop, implement and monitor one effectively. 

This is where professional financial advice can add significant value. 

An adviser can help trustees develop a robust investment strategy that reflects the charity’s objectives, anticipated cashflow needs, reserve policy, investment time horizon and attitude to risk, while ensuring decisions are aligned with the charity’s governing documents and the Charity Commission’s guidance. 

For charities with more substantial reserves, the choice of investment manager, platform or discretionary fund manager can have a meaningful impact on both long-term outcomes and governance. Rather than relying on familiarity or reputation alone, we can undertake a comprehensive review or “beauty parade” of the marketplace, comparing investment managers, platforms and solutions against agreed criteria such as investment philosophy, ethical capabilities, governance standards, reporting, service levels, costs and overall value for money. 

This independent due diligence helps trustees demonstrate that they have considered the available options carefully and selected a solution that is appropriate for the charity’s specific circumstances. 

Our role doesn’t end once the investments are in place. Investment governance is an ongoing process rather than a one-off exercise. We work alongside trustees of charities to review investment performance, monitor whether the agreed strategy remains appropriate, assess changes in legislation or Charity Commission guidance, and consider whether the charity’s own circumstances or objectives have evolved. 

Where appropriate, we can recommend adjustments to the investment strategy, rebalance portfolios, review the continued suitability of investment managers and ensure the charity’s investments remain aligned with both its financial objectives and its values. 

Ultimately, our role is not to make decisions on behalf of charity trustees. It is to provide the expertise, independent oversight and ongoing support that enables trustees to make informed decisions, demonstrate good governance and remain focused on delivering the charity’s mission. 

Good Governance Is About Looking Beyond the Numbers 

Investment performance matters. 

But so do reputation, transparency and trust. 

Supporters increasingly want to know not only how charities spend their money but also how they invest it. 

A well-managed investment portfolio can provide financial resilience, generate additional income and help protect reserves against inflation. At the same time, an investment strategy that reflects the charity’s values can strengthen relationships with donors, beneficiaries and the wider community. 

Those two objectives don’t have to compete with one another. 

My Advice to Charity Trustees 

I encourage you to think about investments in exactly the same way as you think about delivering services. 

Every decision should come back to one simple question: 

“Does this help us achieve our charitable purpose?” 

If the answer is yes financially, ethically and strategically you’re probably asking the right questions. 

If the answer isn’t clear, it’s worth reviewing your investment strategy and seeking professional advice before the reserves become the financial equivalent of that cupboard everyone promises to sort out “next month.” 

Final Thoughts 

Charities exist to create positive change. Their investments should support that ambition, not undermine it. 

The role of trustees isn’t necessarily simply to generate the highest possible return, it’s to make informed, balanced decisions that protect the charity’s future while remaining true to its mission. 

The Charity Commission’s guidance and the Butler-Sloss judgment have given trustees greater confidence that ethical considerations are a legitimate part of good investment decision-making. That’s good news, not just for trustees of charities, but for the beneficiaries, donors and communities they serve. 

Making your charity’s money work harder isn’t just about growing capital. It’s about ensuring every pound reflects the purpose, integrity and values of the organisation it belongs to. 

And if, after reading this, your investment policy has moved a little higher up the agenda than the biscuit selection for the next trustee meeting, I’d consider that a worthwhile return on investment. 

To find out more about how we can support charity trustees with their financial planning, speak to one of our financial advisers. 

Contact us on 0330 320 9280, email info@cravenstreetwealth.com or complete our online enquiry form for practical advice tailored to your own circumstances and needs. 

The content of this article is for information only and does not constitute formal financial advice. This material is for general information only and does not constitute investment, tax, legal or other forms of advice. 

References to legislation and tax is based on our understanding of United Kingdom law and HM Revenue & Customs practice at the date of publication. These may be subject to change in the future.  No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of these comments. 

 You should not rely on this information to make, or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation. 

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