Investing – what should charities consider?
May 16, 2018
Virtually all charities undertake some form of investment.
The decision of how much, when and what to invest in can be a challenging one for trustees. You must consider the current cash demands of the charity, the need for regular income and the desire for capital growth. These factors need to be considered alongside investment risk.
Environmental, social and governance factors are also becoming increasingly important for charities when deciding their investment approach. A well thought-through investment policy is the best way to deliver your investment aims.
Why do charities invest?
Charities usually invest to generate a financial return to help them carry out their objectives.
A charity may, however, also invest to directly deliver its charitable objective as well as generate a return, for example, a below-market rate of interest loan to a charity with a compatible charitable objective.
What are a trustee’s responsibilities when making financial investments?
Trustees have overall responsibility for the investment of the charity’s funds. The responsibility cannot be delegated. When making investment decisions you should use your skills and knowledge in a way that is reasonable in the circumstance (the ‘duty of care’).
This means considering the relevant issues, taking appropriate advice and reaching a reasonable decision.
Trustees should approve an investment policy. The policy is the framework in which investment decisions are made. The policy should suit the charity’s circumstances, so could be very simple.
Questions all trustees should consider
- Do you have a written investment policy, approved by the trustees?
- Are significant investment decisions, including the rationale, documented?
- Do you have sufficient expertise to make informed investment decisions? If not, is appropriate advice taken?
- Is investment performance monitored and appropriate action taken?
If you would like to discuss this in more detail, please contact Tracey Johnson. Alternatively, please call 01772 821 021.
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