Charitable Trusts and ESG May 2022

Dan Harris
ChanceryESG, ESG

Much needed clarification from the High Court, thirty years on from Harries v. Church Commissioners

The recent decision of the English High Court in Re Ashden Trust[1] provides important clarification of influential statements made some thirty years ago by the then Vice-Chancellor in Harries v Church Commissioners for England (the Bishop of Oxford case).[2] The High Court had an opportunity to consider whether two charities were each able to adopt a new investment policy that would exclude a large number of potential investments because the trustees consider that they conflict with the charitable purposes of the trusts.

Bishop of Oxford case

In the Bishop of Oxford case, the Vice-Chancellor, in an obiter dictum, considered that maximising financial return, based on well-established investment criteria, is the “starting point“. From there, he considered various categories of case, including cases where there is a direct conflict with the charity’s purposes. This category was relevant for the purposes of Ashden. The Vice-Chancellor said:

If … trustees were satisfied that investing in a company engaged in a particular type of business would conflict with the very objects the charity is seeking to achieve, they should not so invest. Carried to its logical conclusion the trustees should take this course even if it would be likely to result in significant financial detriment to the charity (emphasis added)


  • A proposed investment policy aligned to the Paris Climate Agreement could lead to the exclusion of a large number of possible investments, which would significantly limit the investable universe for the trusts. This contrasted with the Bishop of Oxford case in which the Vice-Chancellor had contemplated that exclusion would not result in financial detriment. The facts in Ashden highlighted the “serious difficulties” that arise if directly conflicting investments are automatically excluded by law.
  • The dictum in Bishop of Oxford did not impose an absolute prohibition against directly conflicting investments. The trustees have a discretion in relation to the exercise of their powers of investment, including in relation to potential situations of direct conflict:

If [maximising financial returns] is the starting point then I find it difficult to see how it should be ignored completely when there is a potential direct conflict… [H]is use of the word “should” means something slightly less than “must” and does not preclude consideration of other important factors.

Current law

For charity trustees to take into account non-financial considerations:

  • Social investments or impact or programme-related investments are made using separate powers than the pure power of investment.
  • Where specific investments are prohibited from being made by the trustees under the trust deed or governing instrument, they cannot be made.
  • Where trustees are of the reasonable view that particular investments or classes of investments potentially conflict with the charitable purposes, they have a discretion as to whether to exclude such investments.
  • They should exercise that discretion by reasonably balancing all relevant factors including, in particular, the likelihood and seriousness of the potential conflict and the likelihood and seriousness of any potential financial effect from the exclusion of such investments.
  • In considering the financial effect of making or excluding certain investments, the trustees can take into account the risk of losing support from donors and damage to the reputation of the charity generally and in particular among its beneficiaries.
  • However, trustees need to be careful in relation to making decisions as to investments on purely moral grounds, recognising that among the charity’s supporters and beneficiaries there may be differing legitimate moral views on certain issues.
  • Essentially, trustees are required to act honestly, reasonably (with all due care and skill) and responsibly in formulating an appropriate investment policy for the charity that is in the best interests of the charity and its purposes. Where there are difficult decisions to be made involving potential conflicts or reputational damage, the trustees need to exercise good judgment by balancing all relevant factors in particular the extent of the potential conflict against the risk of financial detriment.
  • If that balancing exercise is properly done and a reasonable and proportionate investment policy is thereby adopted, the trustees have complied with their legal duties in such respect and cannot be criticised, even if the court or other trustees might have come to a different conclusion

Limited application?

While many of the same considerations may apply more generally to fiduciaries, it must be remembered that charitable trusts are in a special class. In a private trust, the trustees owe their fiduciary and other duties to the beneficiaries, from whom consent might be obtained.[3] Charities have no beneficiaries as such; they are trusts for a public benefit purpose. The overriding duty of charitable trustees is to further the purposes of the charity.

© 2022 Chancery Advisors Limited. This note is provided for general information only. It does not constitute legal or other professional advice and should not be relied on. You should take specific legal advice on any particular matter which concerns you. If you do require advice, please contact a Chancery Advisors partner.

[1] Trustees of Ashden Trust v. Charity Commission [2022] EWHC 974 (Ch)

[2] [1992] 1 WLR 1241

[3] In the recent charity case, Children’s Investment Fund (UK) v Attorney General [2020] UKSC 33, Lady Arden seems to have concluded that the fiduciary duties owed by trustees (in that case it was actually the member of the incorporated registered charity) are owed “to the charitable purposes or objects of the charity“.