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Latest 24 February 2023

Charity Commission must act to ensure climate commitments are upheld

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Bear with us, because we’re about to explain how a small piece of charity law could have big consequences for the UK’s efforts to reach net zero; that the Charity Commission is letting it happen, and how the Good Law Project is teaming up with RSPB to call on the Commission to act.

Charities make investments, like businesses do, to bring in more revenue. The returns charities get on investments are used to fulfil their charitable objectives. Like businesses, charities that make investments are expected to maximise their returns. Or to put it another way, they are meant to make sure their investments bring in as much income as possible.

But what happens when the things a charity invests in cut across their charitable objectives? The High Court recently considered this question. 

The court heard that a number of charities list “adhering to the Paris Agreement” among their objectives. In other words, one of their charitable objectives is to do everything they can to ensure that global temperatures rise by no more than 1.5C – the limit agreed in Paris by world leaders in 2015. 

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Sometimes, though, charities are told that the way to maximise their returns is to invest in activities that promote global heating – like investing in an oil company. When this happens, the charity’s commitment to maximise its charitable investments can be in direct conflict with its charitable objective to minimise global heating.

The High Court ruled that, when such a situation arises, a charity’s trustees must balance its charitable objectives with the need to make investments, and can refrain from investing for non-financial reasons. This is called the Butler-Sloss judgement.

In response to the Butler-Sloss judgement, the Charity Commission amended its guidance. But for reasons we don’t understand, the Commission’s updated guidance suggests that charities don’t have to consider whether their investments contradict their charitable objectives. It’s clear where this could lead us – charities that are about ending global heating thinking themselves obliged to invest in companies that are making it worse. 

At Good Law Project, we’ve felt for some time the Charity Commission is falling short on its social responsibility with regards to global heating. We have already asked the Commission to investigate the climate-denying charity GWPF. But now we’re joining up with RSPB to write again to make sure the Commission amends its guidance so charities can stick to doing what they do best: dedicating all their efforts to making the world a better place. 

You can read the full text of the letter here.

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