The study found that although charities are generally legally permitted to make social investments, and many do so, some trustees are cautious about taking up social investment opportunities due to uncertainties about their powers and duties.
In addition to the statutory power for trustees to make social investments the Law Commission recommends that government should introduce statutory duties specific to social investment, and also make it clear that trustees can use permanent endowments to make social investments, providing they do not expect a negative financial return. The commission says the Charity Commission and HM Revenue & Customs should update their relevant guidance.
But the National Council for Voluntary Organisations warned that charities, in particular charitable foundations, should not feel pressured into making social investments as a result of the Law Commission’s proposal.
Andrew O’Brien, a senior policy officer at the NCVO, said: “Social investment is likely to be a viable option for only a small number of charities. The choice to make social investments should be made freely by trustees.”
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