As a charity operating in the United Kingdom, managing investments is crucial for sustaining operations and fulfilling your organisation's mission. However, there are several essential factors that charities must consider when investing in the UK to ensure compliance, ethical practices, and effective stewardship of funds.

Here are some key points for charities to be aware of:

1. Charity Commission regulations

Charities in the UK are regulated by the Charity Commission, which has specific guidelines and rules regarding investment practices. These regulations cover topics such as investment powers, ethical investment policies, and reporting requirements. Charities must familiarise themselves with these guidelines and ensure their investment strategies align with the Commission's expectations. We encourage our charities to be familiar with a number of Charity Commission guidance papers, the primary ones being CC3: The Essential Trustee, and CC14: Investing Charity Money.

2. Investment policy and objectives

Every charity should have a clearly defined investment policy that outlines the organisation's investment objectives, risk tolerance, and ethical considerations. This policy should be reviewed regularly and updated as needed to reflect changes in your charity's circumstances or the investment landscape.

3. Ethical and socially responsible investing

Many charities prioritise ethical and socially responsible investing to ensure their investments align with their values and mission. This may involve screening out companies involved in activities deemed unethical or harmful, such as tobacco, weapons, or environmental pollution. Stakeholders can also take a more active stance and engage with investee companies to ensure environmental, social and governance (ESG) risks and bad practices are managed appropriately, hopefully enhancing shareholder value and returns. Furthermore, charities benefit from our use of a third-party data provider, Sustainalytics, which allows us to assess the non-financial and ESG risks associated with investments. This tool is actively used by our centralised research team and used by investment managers to assess portfolios to provide direction when looking to manage to specific instructions. Charities should consider establishing a policy and seeking out investment opportunities that align with their principles.

4. Risk management

Charities must carefully manage investment risks to protect their assets and ensure long-term sustainability. This may involve diversifying their portfolios, conducting due diligence on potential investments, and regularly monitoring and adjusting their investment strategies as needed.

5. Professional advice

Given the complexities of investing and the legal and regulatory requirements, it is often advisable for charities to seek professional advice from financial advisors, investment managers and legal experts. These professionals can provide guidance on investment strategies, risk management, and compliance with relevant regulations.

By considering these factors, charities can navigate the investment landscape in the UK more effectively, ensure compliance with regulations, and make informed decisions that align with their values and objectives.

The JM Finn Charity Investment team

JM Finn runs an award-winning charity portfolio service that specialises in charity investment management. The Charity Investment team at JM Finn was set up 19 years ago, and over that time has developed into one of JM Finn’s largest teams. Five specialists now look after approximately £525 million on behalf a range of charities; the team has won the City of London Wealth Management Awards ‘Best Charity Investment Service’ in 2020, 2021 and 2022 – and has been shortlisted for the Magic Circle Charity Investment Management Company of the Year 2024.

To find out more about how JM Finn could help with investing for charities, please get in touch.

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