FPR Year 4: Why we are adjusting the investment criteria
In Short
The Charity Commission for England and Wales has issued updated guidance about ‘investing charity money’. We know that other charity regulators apply in Scotland and Northern Ireland. The FPR is amending its criteria to reflect the Charity Commission changes as many of them are about embedding accepted good investment practice.
Most of the Commission’s changes are small changes to the guidance that makes the language clearer. But it does add two new factors that foundations will need to adjust their future reporting to reflect. So this year, FPR will monitor how many foundations report about these but will not score foundations on them.
Also, a set of Charities’ Investment Governance Principles developed by the Charity Finance Directors Group (CFDG) is due to publish in Autumn 2024. This will be too late for the FPR this year (2024/25: research is conducted in August / September 2024) so the Year Four criteria will not reflect that.
The New Investment criteria
Q75: Does the foundation publish an investment policy?
Q76: Does the investment policy include: (these come from the new rubric.
Again, each is worth 1/8 of the point: the last two are only applied where relevant to the individual foundation.)
a) what, if anything, the foundation’s governing document says about how it must / can invest.
b) the foundation’s investment objectives, including any relevant reputational and other non-financial factors.
c) the foundation’s attitude to risk (no change)
d) how easily or often the foundation needs access to its money.
e) the timeframe for investment – short, medium or long-term. (This is newly split-out to match the new guidance.)
f) the foundation’s approach, if any, to ESG factors and to engagement with the companies in which the foundation invests.
g) how the foundation monitors and reviews its investments, including key benchmarks.
h) who the foundation’s investment advisers and managers are, their responsibility and remit, and how the foundation works with them.
In previous years, we only scored part (h) if it was relevant to a particular foundation – and not if a foundation had no investment manager, or was a company rather than a charity. We will adopt a similar approach this year: foundations will be exempt from the new (h) if appropriate.
We will also note the following items because the new guidance calls for them, but we will not score them this year. We may score them in future years:
Q77: Does the investment policy include / state:
i) the foundation’s purposes and plans and how its investments fit with these. (This comes from the new preamble.)
j) any sectors or organisations which the foundation considers conflict with its purposes. (This is a new factor.)