Butler-Sloss & Others v The Charity Commission for England And Wales & Another

This claim was brought by the trustees of two charities (the Ashden Trust and the Mark Leonard Trust; “the Claimants”), both of which have environmental protection or improvement as one of their main charitable purposes. The Claimants sought the Court’s approval to adopt an investment strategy that would, as far as practicably possible, exclude investments that did not align with the goals of the Paris Agreement under the UN Framework Convention on Climate Change (UNFCCC), which requires the 195 countries who are party to it to cut greenhouse gas emissions to tackle climate change. Though it is the nation signatories who must comply with the obligations, with private persons and charities not bound to it as such, the Claimants nonetheless chose the Paris Agreement as a benchmark with which to conclude that any investments that do not align with its goals are in direct conflict with their charitable purposes. The Claimants were, however, concerned that adopting such an investment strategy would not be consistent with their fiduciary duties (and thereby be unlawful) as it would exclude many potential investments and may lead to financial detriment (if only in the short term). They therefore sought approval from the High Court to adopt this investment approach. Their claim was defended by the Charity Commission and the Attorney-General. Though they supported the need for the court to clarify the effect of Harries v Church Commissioners for England [1991] 10 WLUK 372 (‘Bishop of Oxford’) and set out the correct approach in law for charity trustees, they argued that it was premature for the court to approve the claimants' investment policies based on the available evidence. On April 29, 2022, the High Court gave judgment, with Green J approving the strategy and deciding that “the Claimants ha[d] exercised their powers of investment properly and lawfully” [Judgment at #88]. Green J set out ten legal principles that summarise the correct approach in law for charity trustees to follow when considering adopting an ethical approach to investment [Judgment at #78]. More specifically, he held that Bishop of Oxford did not lay down an absolute prohibition on making investments that directly conflict with the charity's purposes, and instead confirmed that, “where trustees are of the reasonable view that investments or classes of investment may conflict with the charitable purposes and thereby risk losing donors or damaging the reputation of the charity, the trustees have a discretion as to whether to exclude such investments” [Judgment at #78(6)]. That discretion should be exercised by reasonably balancing all relevant factors, including the extent of the potential conflict against the risk of financial detriment. Green J concluded that, “if that balancing exercise is properly done and a reasonable and proportionate investment policy is thereby adopted, the trustees will have complied with their legal duties” [Judgment at #78(10)]. In this case, Green J considered that the Claimants had sufficiently balanced these factors and so their proposed investment policy was lawful. Green J made the requested declaration that permits charity trustees to adopt a policy that aligns their charities’ investments with their charitable purposes, even though it may risk reducing financial returns. On November 15, 2022, the government issued a formal response to the judgment and its implications for investment guidance. That confirmed the Charity Commission will publish updated guidance by summer 2023.