The High Court has backed two charitable trusts who want to put planet ahead of profit in what could prove an important new ruling.
In a decision on Friday, Mr Justice Michael Green approved the investment policies of two trusts that had aligned their targets to combat climate change.
Representatives for the two trusts – both linked to the Sainsbury family – said the decision would allow trustees to focus on avoiding the worst impact of climate change, even if that means excluding large parts of the market.
“The claimants have decided, reasonably in my view, that there needs to be a dramatic shift in investment policies in order to have any appreciable effect on greenhouse gas emissions and for there to be any chance of ensuring that there is no more than a 1.5C rise in pre-industrial temperature,” Mr Justice Michael Green said.
The Charity Commission is already working on new guidance for trustees. It welcomed the decision on Friday, saying charities “understandably” want to invest ethically.
Aarti Thakor, director of legal services at the Charity Commission, said: “We welcome this judgment and its confirmation of the law relating to ethical investments in charities. We are pleased that the judge found, in line with our proposed guidance, that trustees can continue to have wide discretion when choosing to invest ethically.
“Charities understandably want to act in an ethical and sustainable manner, and we recognise that investments are a key source of influence. However, we are mindful that the charitable sector is hugely diverse and there are many different ways to drive positive change.”
The case was brought by the Ashden Trust and the Mark Leonard Trust.
Sarah Butler-Sloss, founder of the Ashden Trust, said: “I’m delighted the High Court endorses our view that investments not aligned to the goals of the Paris Agreement conflict with our charitable work to alleviate poverty and protect the environment.
“We can now exclude them from our portfolio. This judgment empowers trustees of other charities that care about the state of the planet and all its inhabitants to invest in a way that mitigates the worst impacts of climate change.”
The case reinterprets case law that dates back to 1992 and did not take climate change into account. At that point judges decided that charity trustees should work to maximise returns on investments and not take ethical or moral considerations into account.
Mark Sainsbury, founder of the Mark Leonard Trust, said: “This judgment marks a milestone in defining the fiduciary duties of charity trustees.
“For too long, responsibilities in this area have been a source of uncertainty and differing advice and it’s been too easy for trustees to ignore the tension between their charitable purposes and… investments.”