The UK’s charities regulator has scrapped words such as “ethical” and “responsible” from its investment guidelines in a major overhaul designed to modernise its advice for non-profits. 

The Charity Commission has proposed “retiring” certain phrases that charities have said are too vague or not inclusive, as part of a wider revamp of its investment guidance. 

In a blog post outlining the changes, Paul Latham, director of communications and policy at the Charity Commission, said: “The new draft guidance instead emphasises that trustees must ensure that, ultimately, the investment approach operates for the benefit of their charity once they have considered all relevant matters.  

“In the context of financial investments, this may lead them to choose to exclude certain investments due to non-financial considerations, or to solely focus on financial return that maximises investment income to spend on their charity’s purpose.” 

The changes to the investment guidelines also serve to bring the commission’s policies in line with a recent legal ruling, known as the Butler-Sloss judgement. In this case, the UK’s High Court ruled in favour of the trustees of two charities that had excluded investments from their portfolios in order to align themselves with the Paris Agreement on climate change. 

Previous Charity Commission investment guidance was based on a much earlier case that had ruled that financial outcomes were more important than ethical considerations. 

Latham said the High Court’s ruling “offered welcome clarification of how existing legal principles should be interpreted by trustees in a modern context”.  

He added: “It confirmed that trustees have wide discretion in making investment decisions, for example, in deciding to exclude certain investments based on non-financial considerations.  

“It also confirms trustees can equally choose to focus just on financial return – ultimately what is appropriate for charities may differ. We have ensured that our updated guidance reflects that judgment.” 

The Charity Commission will be testing its new guidance with charities over the next few weeks with a view to publishing finalised guidance later this year. 

Last Updated: 21 April 2023