Investment policy
Outlined below are items which trustees/staff/committee members should consider including in an investment policy. The investment policy is a tool to record the charity's agreed approach and to instruct those with a role in managing the charity's investments as to the charity's agreed approach. As noted in Principle 7, the investment policy can also be shared publicly as part of an approach to openness and accountability. For some charities, some items listed below may be recorded in other policies.
Purpose of investments and investment objectives (see Principle 1 and Principle 3)
- how the charity's investment objectives support and further the charity's purposes
- if the charity's governing document includes any instructions or restrictions in relation to investments or what matters must be handled by the trustees
- for charities with endowment: whether the charity holds permanent endowment or expendable endowment; whether the charity has adopted a total return approach
- for charities with expendable endowment: the time horizon over which the charity intends to exist; whether the goal is to preserve value, grow or spend; and how this approach serves the charity's purposes
- how the investment policy interacts with the reserves policy and other aspects of the charity’s work
Governance structure (see Principle 2 and Principle 4)
- which Trustees will have oversight of the charity's investments, the composition of any committee and how the relationship between trustees and any staff/committee with delegated responsibilities will be governed (delegations framework)
- how the relationship between the charity and any professional provider will be governed (with reference to delegation framework)
- whether the charity will take advice from someone experienced in investment matters, and whether that is a Trustee/committee member, staff member, volunteer or independent professional provider
Conflicts with purposes and reputational risks (see Principle 3)
- conflicts identified between the charity's purposes and potential investments which need to be managed
- reputational risks identified which need to be managed
- where conflicts or reputational risks have been identified and it has been determined that these need to be avoided or managed, how this will be carried out (for example through exclusions or responsible investment approaches)
Investment approach (see Principle 4)
- the charity's amount to invest, allocations to financial and social investment
- short, medium and long-term needs; liquidity needs
- financial targets
- risk appetite
- asset allocation
Whether and how responsible investment approaches will be used:
- to manage conflicts with the charity's purposes and reputational risks
- alongside monitoring of ESG factors to manage risk and strengthen financial performance
- to further the charity's purposes beyond financial returns"
Reviewing the charity's investments
- how investments will be monitored and reviewed, including any benchmarks and timing of reviews
External professional providers (this may form an annex to the main policy)
- who the professional providers are (eg investment managers, investment advisers) their suitability, responsibility and remit
- where the charity is delegating decision-making to an investment manager or investment adviser (discretionary management) what decisions they can and cannot make, how decisions should be made on the charity's behalf
- fees and charges
Social investment policy
If the charity is intending to make social investments, details are included in the investment policy or in a standalone social investment policy. See Responsible, Impact and Social investment section for more on what to include in a social investment policy.
