The UK’s Charity Law Association (CLA) has recommended that trustees should be free to invest on a total-return basis without seeking prior Charity Commission approval. As part of its submission to the government’s Charities Act Review this summer, the legal umbrella body said that in the context of reduced funding for the Charity Commission a number of ‘refinements’ to the Commission’s powers were needed and that total-return freedom would constitute a ‘deregulatory measure’.
The CLA’s submission also remarked on the advisability of permitting ‘mixed-motive investment generally’ – a reference to the Commission’s own CC14 guidance introduced last year. This allowed charities to make investments based on a combination of furthering their charitable objectives and securing a financial return, where before they were only permitted to invest based on one or the other. The guidance has been a bone of some contention within the sector, earlier versions having been criticized as being confusing for trustees and likely to obscure, rather than clear, the ground for social investment, which was one of its original intentions and though the final version released in November 2011 has been generally well received, unease at the idea of mixed-motive investment persists.
In its own submission to the government’s review, the National Association of Voluntary and Community Action (NAVCA) flagged up a ‘real risk that charities would be pressured into maximizing the return for investors rather than furthering the interests of charities’. The CLA acknowledged in its submission that allowing mixed-motive investments without prior authorization by the Commission held ‘potential risks’ and suggested incorporating the requirement for trustees to ‘be clear at the outset as to their purpose in making the investment’.
Civilsociety.co.uk, 24 May 2012, 13 April 2012