Consultation outcome

More information: list of proposed changes to current CC14 guidance

Updated 1 August 2023

Applies to England and Wales

This page sets out the proposed changes to CC14: charities and investment matters.

We have only included sections where we are proposing to make changes. There are no proposed changes to any other sections.

1. Introduction

This section to be removed - except the definition of ‘must’ and ‘should’ which we will include in updated guidance.

Section 1 of the guidance will now be ‘Reasons to invest’.

2. Executive summary

This section to be removed. Section 2 of the guidance will now be ‘Investing to make money – financial investment’.

3. The legal framework for financial investment

This section to be removed. Section 3 of the guidance will now be ‘Follow the law on financial investment’.

4. Setting a charity’s investment objectives

4.2 What risks should a charity consider when making investments?

Information about ‘Environmental, social and governance (ESG) risk moved to the top of the list of types of risk.

The first sentence of this section is now: “When considering which companies and organisations to invest in, all charities can take into account such factors as impact on climate, employment practices, sustainability, human rights, community impact, executive compensation and board accountability. “

It used to be: “When considering which companies and organisations to invest in, charities are increasingly taking into account such factors as impact on climate, employment practices, sustainability, human rights, community impact, executive compensation and board accountability.”

4.3 What should an investment policy cover?

Under ‘In more detail’, the fifth bullet point is now: “the types of investment it wants to make, including whether the trustees have decided to take a responsible investment approach”

It used to be: “the types of investment it wants to make, this might include ethical considerations”

5. Deciding what to invest in

5.1 What can a charity invest in?

Under ‘In more detail’, the first bullet point about what trustees must consider in all cases is now: “how suitable any investment is for their charity - this will be influenced by the charity’s approach and attitude to risk across its investment portfolio”

It used to be: “how suitable any investment is for their charity - this will be influenced by the charity’s attitude to risk across its investment portfolio”

5.3 Collective investment schemes (pooled funds) - what are the benefits for charity investors?

Under ‘An example of a collective investment scheme’, the penultimate sentence is now: “Before investing, trustees should review these documents and regularly review them after investment, to ensure that they know what their charity is investing in and that each selected pooled fund continues to meet the charity’s needs.”

It used to be: “Before investing, trustees should review these documents and regularly review them after investment, to ensure that each selected pooled fund continues to meet the charity’s needs.”

6. Who can manage and make decisions about investments?

6.4 What should a charity think about before choosing an investment manager?

Under ‘In more detail’, the following bullet point has been moved from the bottom of the list to the third bullet point: “the investment manager’s capacity to handle any responsible investment requirements; does the investment manager understand the charity’s responsible investment policy and can they respond to the charity’s requirements? What other experience do they have in these investment approaches for charities?”

6.6 What are the trustees’ and the investment manager’s responsibilities?

Under ‘Trustees’ duty of care’, we have added this bullet point: “knowing what their charity is invested in”.

6.8 What should a charity consider when looking at an investment manager’s charges?

Under ‘In more detail’, we have added “including any incentives or hidden fees to the third bullet point. It now reads “charges relating to pooled funds which are for investment management, and other related fees, including any incentives or hidden fees”.

We have add a final bullet point to the list: “fees for services provided by advisers - in particular consider any performance based incentives or hidden fees”

7. Monitoring investments and performance

This section remains the same.

8. Other questions on financial investments

8.9 Can a charity engage in stakeholder activism?

Under ‘In more detail, the first bullet point is now: “shareholder activism needs to be related to its aims”

It used to be: “shareholder activism needs to be related to its aims, and the charity needs to consider and manage any risk of significant financial detriment”

We have removed this text from the second sentence in final paragraph of this section: “in other words seeking the best long term financial return for the charity.”

The sentence now reads: “However, they will generally be voting with long term financial outcomes in mind”.

9. Cash deposits

9.1 What should trustees consider when investing in savings and cash deposits?

Under “Investigate the benefits offered by a particular deposit account”, the final bullet point is now: “the charity’s responsible investment stance”

It used to be: “the charity’s ethical stance”

New section: Investing to achieve your charity’s purposes

Between sections 9 and 10, we have added a new section on investing to achieve your charity’s purposes.

You can invest your charity’s money to achieve its purposes directly, in a way that may also make a financial return.

Follow different rules and considerations depending on whether your intention is to make a

• social investment
• programme related investment
• mixed motive investment

10. Programme related investment (PRI)

As a result of adding a new section 10, this section will now be section 11.

All references and links to section 10 have been updated to section 11.

10.1 What is PRI?

Under “The difference between financial investments, PRI and grants” we have removed this sentence: “Usually the charity will be seeking the best financial return on their investments within the level of risk they consider appropriate for the charity”

The first bullet point is now: “Financial investment generating a financial return”

It used to be: “Financial investment targeting the best rate of financial return given the level of risk considered appropriate”

10.11 Can charities use their permanent endowment to make PRIs?

Under “Justifying it as a financial investment”, the third sentence is now: “Trustees can take account of responsible investment considerations or make mission connected investment when investing permanent endowment.”

It used to be: “Trustees can take account of ethical investment considerations or make mission connected investment when investing permanent endowment.”

11. Mixed motive investments

As a result of adding a new section 10, this section will now be section 12.

All references and links to section 11 have been updated to section 12.

11.1 What is a mixed motive investment?

Under ‘In more detail’, the first bullet point is now: “financial investment -– generating a financial return given the level of risk considered to be appropriate or”

It used to be: “financial investment -– seeking the best financial return given the level of risk considered to be appropriate or”

Annex 1: Technical terms used in this guidance

We have added: “A duty to invest is where trustees do not have a choice about whether to invest money or keep money invested. The charity’s governing document (or another document) says that the trustees must invest the money. Most commonly a duty to invest is relevant to permanent endowment.”

We have removed: “‘Ethical investment’ describes a way of making financial investments which takes into account the charity’s values and ethos. Trustees must exercise their investment power in the best interests of the charity.”

We have added: “Financial investment means investing with the aim of making money, but generating income or growing the value of your charity’s money or other assets.”

We have added: “Purposes means the purposes which the charity is set up to achieve. The purposes are usually express in a charity’s governing document.”

We have added: “Responsible investment is, rather than just focusing on the financial return on an investment, taking into account your charity’s purposes and values when making financial investments.”