Professor Lord Nicholas Stern has backed moves to get clarification on whether UK charities, who have combined investments of £63bn, should invest in companies that contribute to dangerous climate change in light of their legal duty to provide a public benefit to society.
The call is also being backed by the former Archbishop of Canterbury Rowan Williams, meaning that it is supported by both a Lord Spiritual (Williams) and Stern, who as a Life Peer is what is known in Parliamentary parlance as a Lord Temporal.
Stern, the leading climate economist behind the seminal Stern Review on the Economics of Climate Change, said: “Charities exist for public benefit and it is entirely logical that their investment decisions should also promote the public benefit…charities can and should lead by example, and need stronger and clearer guidance on their investment decisions.”
An open letter signed by major UK charities including Joseph Rowntree Charitable Trust, Nesta and Client Earth call on the UK charity regulator the Charity Commission and the Attorney General to seek a ruling on whether charities should ensure their investments support their goals and their duty to provide public benefit.
They also ask for specific legal guidance on whether charities should invest in companies that contribute to climate change. They argue that current guidance on socially responsible investment is based on case law dating back to 1991, before climate change was an important public policy issue.
Bates Wells, the leading charity law firm that supported the 1991 challenge, helped the coalition of charities draft the letter.
Bates Wells partner Luke Fletcher, the letter’s author, said: “Members of the coalition have real commitment to seek a landmark judgment on responsible investment. They believe the Charity Commission should take the lead by making a reference to the Tribunal itself.”
The UK Charity Tribunal rules on challenges to Charity Commission actions and helps clarify charity law.In response to the letter, Rebecca Fry, Head of Legal Policy at the Charity Commission, said:
“We agree that public attitudes to the broad issue of ethical investment by charities have moved on and we are sympathetic to calls for greater clarity for trustees. However, a reference to the Tribunal could be costly, time-consuming and its outcome, by definition, uncertain. There are other options to consider which might achieve a better outcome and greater clarity.”
The open letter from the charities follows a 2015 legal opinion from top UK charity barrister Christopher McCall where he said charities may be legally required to re-evaluate their approach to carbon intensive investments.
The charities’ campaign has the support of NCVO, the 14,000 member organisation for the UK voluntary sector and former church leader Williams, now Lord Williams of Oystermouth.
He said: “It is now of real importance that charity law should be clarified in a way that acknowledges the need to align investment practice with the imperatives of responsibility to and for our global environment.”
The 1991 ‘Bishop of Oxford’ case involved a legal challenge on the extent to which the Church Commissioners, one of the UK’s biggest charity investors, should divest from companies with interests in apartheid-era South Africa. It was found that charities should not make investments that conflict with their objects.
Alice Garton, Head of Climate at ClientEarth, said: “Charity trustees have legal duties to seek financial returns from investing a charity’s assets but they also have duties not to make any investments which might conflict with its charitable purpose….by clarifying how trustees should approach this issue, the Charity Commission and Attorney General can provide much-needed certainty as well as positive support for investment in a safe and secure future.”
In other news, the PRI, UNEP FI and the Generation Foundation have launched ‘A Legal Framework for Impact’, a project to understand and analyse how investors can manage their fiduciary duty and sustainability impact duties, and what happens if they are in conflict.