IN A landmark judgment, the High Court has ruled that charities are allowed to invest in funds that seek to keep global warming in check, even though they could make a better return elsewhere.
The ruling overturns a 30-year-old judgment that compelled charities to maximise return on their investments, and not take into account ethical or moral considerations that might reduce financial benefits. The only exception was where an investment conflicted directly with the charity’s purposes, or indirectly with its work.
The case was brought by Ashden and the Mark Leonard Trust: two of the 17 charities run by the Sainsbury supermarket family which support environmental protection or improvement and the relief of those in need. The Ashden Trust also works on the prevention or relief of poverty.
In his judgment, handed down last Friday, Mr Justice Michael Green said: “The claimants have decided, reasonably in my view, that there needs to be a dramatic shift in investment policies in order to have any appreciable effect on greenhouse gas emissions, and for there to be any chance of ensuring that there is no more than a 1.5°C rise in pre-industrial temperature.”
It opens the door to charities’ adopting more ambitious investment approaches in alignment with the 2015 Paris climate agreement. Ashden’s founder, Sarah Butler-Sloss, said that she was “delighted” by the ruling. “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,” she said.
The court was told that the charities’ trustees had developed new draft investment policies, excluding, as far as practically possible, investments that did not align with the goal of the Paris Agreement. But they were concerned that they might not be lawful and consistent with their duties, and there was a lack of clarity in law.
The judge said: “I believe that the decision to adopt the proposed investment policy is sufficiently ‘momentous’ to justify the court giving its blessing to that decision.” The Charity Commission will now need to develop revised guidance for charity trustees.
Mark Sainsbury, founder of the Mark Leonard Trust, described the judgment as “a milestone”, and said: “For too long, responsibilities in this area have been a source of uncertainty and differing advice, and it’s been too easy for trustees to ignore the tension between their charitable purposes and certain investments.
“With this judgment there can now be no doubt that all charity trustees need to weigh up financial return against any potential conflicts with their aims and work. I’m delighted we can finally crack on and implement our investment policy, and hope that it serves as a template for others.”
The Church Commissioners welcomed the judgment. In a statement on Wednesday, they said that it was “not a surprise to us and confirmed our interpretation of the legal position”. It continued: “We invest the endowment in line with our responsible and ethical guidelines and consider our approach to be global best practice for responsible investment. We have never accepted that investors who adopt this approach need to sacrifice returns, as evidenced by our results.”
In 2019, the Ashden Trust, with the RSPB, the Joseph Rowntree Charitable Trust, Nesta, ClientEarth, the Ecumenical Council for Corporate Responsibility, and Quakers in Britain, wrote to the Charity Commission and the Attorney General, urging them to seek a legal ruling on trustees’ responsibilities on investing on environmental grounds. It followed a series of controversies over high-profile charities’ holding investments viewed as in conflict with their aims.