Charities exist for the public benefit and often work to tackle pressing socio-economic issues, like health and environmental protection. Charities want to invest in ways which reflect their charity’s purposes, or certainly not invest in ways which conflict with those purposes. For nearly 30 years, the Trustees of the Climate Change Collaboration (The Aurora Trust, The JJ Charitable Trust and The Mark Leonard Trust) felt uncomfortable being encouraged to make investments that clearly conflicted with the purposes of their charities, until a landmark High Court ruling provided an authoritative answer on how they should manage them.
From the mid-1990s, Trustees felt conflicting investments were not right. They were making grants to tackle climate change, while also being encouraged to invest in fossil fuel companies – key drivers of climate change.
In 2015, the Trusts began leading the European Divest Invest movement, which seeks to use the collective influence of global investors to divert money away from fossil fuels and into climate change solutions.The total assets globally divested from fossil fuels now stands at over $40 trillion.
The Trustees were quite certain that fossil fuels conflicted with their charitable purposes, but it was less clear how they could manage these conflicts, as all investments emit some greenhouse gases. Trustees commissioned legal opinions in 2015, which showed that the underlying law and Charity Commission guidance were unclear on how Trustees manage in these contexts.
From 2019 onwards, Trustees wanted to adopt investment policies that aligned to the 2015 Paris Agreement to keep global temperature increases well below two degrees. They needed legal clarity on whether they could do so. The Climate Change Collaboration Trusts built up a coalition of 55 civil society organisations – including the RSPB, NESTA and Quakers in Britain – which also wanted clarity. In 2021, the Aurora and Mark Leonard Trusts applied to the High Court to get a definitive view of the law and were subsequently granted a three-day hearing in April 2022. The JJ Charitable Trustees had similar concerns about the law and helped cover legal fees.
Picture 6, PictureIn May 2022, the Butler-Sloss judgment confirmed that charities should avoid conflicting investments and that the Mark Leonard and Aurora Trusts could adopt policies which aligned their investment portfolios with the Paris Agreement temperature goals. The judgment had wide ramifications for the whole charitable sector. The Charity Commission published revised investment guidance, and an expert steering group (supported by the Climate Change Collaboration Trusts and including representatives from NCVO, and the Charity Finance Group) are developing new principles for charity investors.
The judgment, and guidance for the sector, will define how Trustees decide which investments to make. In the context of biodiversity loss and climate change, this is hugely important.
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