Ask most trustees what their charity investment policy is for, and you’ll get a fairly predictable answer. Returns. Growth. Financial sustainability. Protecting the organisation’s reserves against inflation.
All of those answers are correct. And all of them are incomplete.
What I took from the investment policy session at Trustee Exchange wasn’t something I had previously encountered: that a charity investment policy is not just a financial document. It is a values document. A statement of who the organisation is, what it believes, and how it chooses to pursue its mission, even in the decisions that happen quietly, in the background, far from the frontline of its work.
In this article, I want to share what I learned from this session and why I think the questions it raises are relevant to any leader thinking seriously about the relationship between money, mission, and integrity.
The New Landscape: What CC14 Actually Means
Before we get into the principles, a little context is helpful.
The Charity Commission recently updated its guidance on charity investments, known as CC14. For those unfamiliar with it, CC14 sets out how trustees should approach investment decisions, and the updated version represents a meaningful shift in how those decisions are framed.
The core change is this: trustees are no longer expected to focus purely on financial return. The updated guidance makes clear that trustees must now balance financial returns with the question of whether their investments further, or at least do not undermine, their charitable purposes.
This is a significant shift. It means that a charity working to improve public health, for example, can no longer simply invest in tobacco companies on the grounds that the returns are strong. The financial case and the mission case must now be considered together.
This is something I’ve navigated personally as a trustee. While there is an inherent drive to grow an organisation’s returns, we hold a broader responsibility: to ensure our financial actions align with public interest, safety, and integrity.
This requires that any investment managers you engage not only possess deep sector expertise but also fully grasp the nuances of your charitable mission. I’ve learned that maintaining a keen eye is vital; these decisions cannot simply be left to third parties. While the current climate makes consistent growth challenging, it reinforces the necessity of maintaining a long-term mindset.
For many trustees, this update will require a fundamental rethink of their charity investment policy. Not because they’ve been doing anything wrong, but because the framework they’ve been operating within has changed.
Time Horizon: The Question Nobody Asks First
One of the most practically useful moments in the session was a deceptively simple observation: most charities don’t begin their charity investment policy conversations with the most important question.
That question is: What is this money actually for, and when will we need it?
The session introduced a critical distinction between two fundamentally different investment contexts:
- Spending down organisations – charities with a fixed lifespan or a planned drawdown of reserves. For these organisations, liquidity and capital preservation are paramount. An aggressive long-term growth strategy that works brilliantly over twenty years is the wrong tool entirely.
- Permanent endowment organisations – charities with funds intended to exist in perpetuity, generating returns that support the mission indefinitely. For these organisations, long-term growth and inflation protection are the primary objectives, and short-term volatility is a manageable feature rather than an existential risk.
Most charities sit somewhere between these two poles, which makes the time horizon question even more important to answer explicitly. Without clarity on this, investment decisions are made in a vacuum. The targets set, the risk appetite adopted, and the asset allocation chosen should all flow directly from the answer.
The session suggested that a realistic long-term target for organisations seeking to protect against inflation is CPI plus four per cent, a benchmark that balances genuine growth with manageable risk over a sustained period.
Reflecting on these two frameworks provided valuable clarity for my role as chair of my charity’s finance and risk committee. While immediate needs and demands are pressing, we must consider what strategy will best sustain the organisation’s long-term infrastructure.
Crucially, this dialogue cannot happen in isolation within the finance and risk committee. It requires full buy-in from all trustees, guided by operational insights from the executive team.
The Ethics Question: Three Models for Responsible Investment
Perhaps the most nuanced part of the session, and the one that generated the most discussion in the room, was the question of responsible and ethical investing.
How should a charity decide what it is and isn’t willing to invest in?
The session outlined three broad models that organisations typically adopt, each representing a different philosophical position:
Negative Screening: Avoiding Harm.
This is the most common approach. The organisation screens out investments in sectors or companies whose activities are incompatible with its values or mission. Fossil fuels, weapons, gambling, tobacco—the specific exclusions vary by organisation, but the principle is the same: the charity commits to not profiting from activities it considers harmful. This model is relatively straightforward to implement and easy to communicate to stakeholders. Its limitation is that it is essentially passive; it defines what the charity won’t do, rather than actively using its investment position to create change.
Positive Impact: Benefiting Society.
A step further. The organisation actively seeks investments in companies, funds, or initiatives that generate positive social or environmental outcomes alongside financial returns. This might include investments in social housing, renewable energy, or community-focused financial institutions. This model aligns investment activity more directly with charitable purpose, but it requires more active management and a broader understanding of the impact investment landscape.
Mission-Aligned Investing: Contributing to Solutions.
The most ambitious model. The organisation uses its investment portfolio as a direct instrument of its mission, channelling capital specifically towards the problems it exists to solve. A charity focused on climate change, for example, might invest directly in green technology ventures or environmental impact funds. This model carries the highest potential for mission alignment and the highest complexity in terms of management, due diligence, and governance oversight.
When I look at the stock market, it reveals rapid expansion across indices like the NASDAQ and S&P 500, particularly among the “magnificent seven” tech giants. Even so, substantial growth remains achievable through investments beyond aggressive technology equities. Selecting a suitable investment firm provides invaluable support in navigating these options, though it demands thorough due diligence and a clear evaluation of your institution’s specific requirements.
The session made it clear that there is no universally right answer. What matters is that the board makes a deliberate, documented choice, one that reflects the organisation’s values, is understood by its stakeholders, and is revisited regularly as the investment landscape evolves.
What Every Trustee Should Know About Their Charity Investment Policy
Whether your organisation has a sophisticated investment portfolio or a modest reserve sitting in a savings account, the principles from this session apply. Here is what I’d take into any trustee or leadership conversation about investment:
- Read the policy you actually have. It sounds obvious, but many trustees sit on boards without ever having read their charity investment policy in full. Start there.
- Ask the time horizon question first. Before discussing returns, asset allocation, or ethical screens, establish clarity on what the money is for and when it will be needed.
- Set a realistic target. For most organisations seeking long-term inflation protection, CPI plus four per cent is a reasonable starting benchmark. Targets that are either too conservative or too aggressive create problems in different directions.
- Choose your ethical model deliberately. Avoiding harm, benefiting society, or contributing to solutions, each is a legitimate choice. What matters is that the choice is made consciously and documented clearly.
- Review the policy regularly. The investment landscape changes. CC14 has just changed. Your organisation’s circumstances change. A charity investment policy that was right three years ago may no longer be fit for purpose.
The Wider Picture
There is something in this session’s message that I think speaks to a broader shift in how we understand the relationship between organisations and their values.
For a long time, the dominant model in both the charity and corporate world was one of compartmentalisation: financial decisions were made on financial grounds, and values were expressed through programmes, campaigns, and public communications. What happened in the investment portfolio was a separate matter.
That model is changing. Stakeholders, whether donors, members, beneficiaries, or employees, are increasingly expecting organisations to embody their values across the full breadth of their activity. Not just in what they say or what programmes they run, but in where their money goes and what it supports.
A charity investment policy that contradicts an organisation’s stated mission is no longer just an inconsistency. In an era of greater transparency and higher public scrutiny, it is a vulnerability.
Maintaining an investment portfolio is essential for charities. It has been clear to me that during uncertain and turbulent periods, having dedicated investments acts much like an individual high interest savings account or a stocks and shares ISA without strict constraints – providing vital financial protection when unexpected challenges arise. Because black swan events and unforeseen crises can emerge at any moment, establishing strong foundational investments is critical for effectively hedging against risk.
Final Thought
A charity investment policy might seem like one of the more technical corners of governance. In reality, it is one of the most revealing.
Show me how an organisation invests its money, and I’ll show you something honest about what it actually values, as opposed to what it says it values.
Getting that alignment right isn’t just good governance. It’s good leadership. And it starts with trustees willing to ask the right questions, even the uncomfortable ones.
Does your organisation’s charity investment policy reflect your mission as clearly as your programmes and communications do?