What is charity investment governance?
Charity investment governance refers to the structures, policies, and responsibilities that guide how trustees manage their charity’s investments. Effective governance ensures that investments are made prudently, align with the charity’s mission, and comply with legal and ethical obligations. Good investment governance is vital for financial sustainability, allowing charities to generate income while preserving and growing their assets to support long-term objectives.
In recent years, increasing scrutiny has been placed on how charities invest their funds, particularly in relation to ethical, environmental, and social concerns. Trustees must navigate these considerations while ensuring they meet their fiduciary duties and manage risks effectively. A well-governed investment approach not only strengthens financial resilience but also builds trust with donors, beneficiaries, and regulators.
Charity investment governance
Why is investment governance important for charities?
A strong governance framework supports trustees in making informed decisions that benefit their organisation. Key benefits include:
- Financial sustainability – Charities often rely on investment income to fund operations and grant-making activities. Proper governance ensures these funds are managed wisely.
- Legal and regulatory compliance – Trustees should adhere to laws and guidelines, such as the Charity Commission’s CC14 guidance, to avoid penalties and reputational damage.
- Ethical alignment – A growing number of charities aim to ensure their investments reflect their values and mission, avoiding conflicts of interest and reputational risks.
- Risk management – Effective governance helps mitigate risks related to market volatility, economic downturns, and liquidity challenges.
- Stakeholder confidence – Transparent and well-structured investment governance reassures donors, beneficiaries, and the public that funds are managed responsibly.
Charity Trustees
The role of trustees in investment governance
Trustees play a fundamental role in overseeing a charity’s investments. Their responsibilities include:
- Acting in the best interests of the charity – Trustees must prioritise the needs of the charity and its beneficiaries over any personal or external interests.
- Developing and reviewing an investment policy – This policy should outline the charity’s objectives, risk tolerance, ethical stance, and performance benchmarks.
- Ensuring compliance with legal and regulatory requirements – Trustees must be familiar with the Charity Commission’s guidance (CC14) and any relevant legislation.
- Assessing financial risk – Understanding market risks and how they may impact the charity’s financial position is crucial.
- Selecting and monitoring investment managers – Many charities appoint professional investment managers, but trustees remain ultimately accountable for oversight and reviewing performance.
- Reviewing investment performance – Regular evaluations ensure the investment strategy remains suitable and effective.
- Maintaining transparency – Trustees should communicate investment decisions clearly to stakeholders and, where appropriate, publish investment reports.
The charity investment governance principles (CIGP)
The Charity Investment Governance Principles (CIGP) were introduced in 2023 by the Charity Finance Group (CFG) in collaboration with sector experts. These principles provide a framework for trustees to improve investment governance.
The five core principles are:
- Investment Purpose – Ensuring investments support the charity’s long-term goals and financial health.
- Leadership – Defining clear roles and responsibilities for trustees, committees, and investment managers.
- Integrity – Making decisions based on evidence, free from conflicts of interest, and in line with ethical considerations.
- Risk Management – Establishing risk tolerance and ensuring portfolio diversification.
- Openness and Accountability – Maintaining transparency through clear reporting and communication.
For full details, visit the CIGP website.
How this knowledge hub can help you
This knowledge hub is designed to provide comprehensive guidance on charity investment governance. It will help trustees:
- Understand their legal responsibilities and fiduciary duties.
- Develop an effective investment policy that aligns with their charity’s mission.
- Navigate ethical investment considerations, including ESG (Environmental, Social, Governance) factors.
- Manage financial risks and ensure prudent asset allocation.
- Engage effectively with professional investment advisors.
- Improve transparency and reporting to stakeholders.
By following these principles and best practices, trustees can make informed decisions that support their charity’s long-term sustainability and impact.
Explore the next section
Legal and regulatory framework.