New guidance on social investments

The Charity Commission has published guidance that makes it clear that charities can invest their funds for a social return, and can make ethical investments even if this offers lower financial returns than other investments.
The document says programme-related investment, in which a charity invests money as a way of furthering its aims rather than to generate a financial return, is an acceptable use of a charity’s funds. It says the money must be invested to further the written objects of the charity.
Examples of these investments include making small loans to organisations or individuals to fund housing deposits or new equipment, and investing large sums in regeneration projects.
The document says trustees should consider the risks involved with this form of investment, such as the potential for private benefit to recipients or to other investors, before using it. Such benefits should be "necessary, reasonable and in the interests of the charity," the guidance says.
The guidance also says trustees "can decide to invest ethically, even if the investment might provide a lower rate of return than an alternative investment".
It says trustees must be able to demonstrate that this form of investment is in the best interests of the charity and must "be clear about the reasons why certain companies or sectors are excluded or included" from their investment portfolio.

[from: Third Sector Online 27.10.11]