Charity trustees can invest for positive environmental impact – landmark legal ruling

A legal breakthrough could influence how £150bn of charity money is invested in England and Wales as trustees are now free to prioritise climate considerations over financial returns.

Charity trustees in England and Wales – who collectively hold more than £150bn in long-term investments – can now prioritise the climate change outcomes of their investments even if this risks reducing financial returns. 

In a landmark High Court ruling on 29 April, Mr Justice Michael Green approved proposed investment policies of the Ashden Trust and the Mark Leonard Trust, both part of the Sainsbury Family Charitable Trusts network. He affirmed that charity trustees could make investments to avoid the worst impacts of climate change, aligning them with the goals of the Paris Agreement, an international treaty that aims to limit global warming to below 2 degrees celsius, even where this involves financial risk by excluding a large part of the market. 

Legal firm Bates Wells represented the charities. Partner Luke Fletcher said: “We’re delighted at today’s ruling which reinterprets the fiduciary duty of charity trustees in a way that’s fit for the 21st century.”

We’re delighted at today’s ruling which reinterprets the fiduciary duty of charity trustees in a way that’s fit for the 21st century

The ruling reinterprets a 30-year old judgment, the “Bishop of Oxford case”, which found that charity trustees should maximise financial return on their investments and ought not take into account ethical or moral considerations that could cause financial detriment to the charity, except in "rare" circumstances where it conflicted with its purposes or work. 

Fletcher emphasised that the Charity Commission would now need to update its investment guidance for trustees, but that the judgement set out the law and would apply to all trustees immediately. 

 

Towards positive impact

The Ashden Trust holds £42m in assets and the Mark Leonard Trust has £22m. Their proposed new investment policy considered by the court showed that the charities wanted to increase their green investments. The policy stated that the trustees considered that “investments in sustainable sectors and climate solutions provide opportunities to increase the trust’s financial return and support its charitable objectives. Zero and low carbon technologies, energy, resource efficiency and nature based solutions and adaptation investments will continue to grow in the developed and developing world. The trustees seek to increase their exposure to these investments.”

Sarah Butler-Sloss, founder of the Ashden Trust, said: “I’m delighted the High Court endorses our view that investments not aligned to the goals of the Paris Agreement conflict with our charitable work to alleviate poverty and protect the environment. We can now exclude them from our portfolio. 

“This judgment empowers trustees of other charities that care about the state of the planet and all its inhabitants to invest in a way that mitigates the worst impacts of climate change.”

Header photo of a 'barefoot solar engineer' in India: Abbie Trayler-Smith / Panos Pictures / Department for International Development reproduced under a creative commons licence

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