England & Wales High Court Judgement: Butler-Sloss & Ors v Charity Commission

• Published date: 30 May 2022
• Subject Matter: orporate/Commercial Law, Charities & Non-Profits
• Law Firm: Withers LLP
• Author: Mr Chris Priestley and Hannah Brearley

On 29 April 2022, the High Court handed down judgement in the case ofSarah Butler-Sloss & Others v Charity Commission [2022]EWHC974(the "Butler-Sloss" case) which addressed the extent to which it was proper for charity trustees to have a wide regard to the impact of their investment decisions on the attainment of the charitable purposes which they intended to pursue, not simply the need to maximise investment returns.

The facts in this case related specifically to charities with general charitable purposes that are pursuing environmental objects, but the principles of the case have wider implications for charity trustees generally and clarify the judgment in the leading case in this area,Harries v Church Commissioners for England[1992] 1WLR1241, commonly referred to as the "Bishop of Oxford's" case.

Background to the case

This case was brought by the trustees of two charities (constituted as trusts), the Ashden Trust and the Mark Leonard Trust, (the "Claimants") both of which are part of the Sainsbury Family Charitable Trusts network. Although both were grant-making charities established for general charitable purposes, both in practice made grants largely for environmental protection or improvement. The trustees therefore wished to adopt investment policies that enabled them to exclude, "so far as practically possible"¹investments that were not aligned with the Paris Agreement (which aims to limit global warming to below 2°C above pre-industrial levels, alongside other plans for reducing greenhouse gas emissions and improving approaches to climate change).

The purpose of the case was to clarify whether it was proper for the trustees to do so as it would effectively prevent them from investing in "over half of publicly traded companies and many commercially available investment funds"²and, as a result, it was almost impossible for them to quantify the financial detriment that could result following the adoption of the new investment policy.

The Charity Commission has providedguidancein relation to charity trustees' investment duties in light of the Bishop of Oxford's case, which set out a number of examples of when charity trustees might properly forego investment return. This guidance distinguishes four types of investment: financial, programme related, mixed motive, and social.

This case was concerned only with financial investments, the purpose of which the Commission describes as being "to yield the best financial return within the level of risk considered to be acceptable - this return can then be spent on the charity's aims". The Commission's guidance considers ethical (often nowadays called "socially responsible") investments, which may result in lower rates of returns for the charity)...