A recent judgment at the High Court of Justice for England and Wales has laid out new legal principles that give nonprofits more freedom — and more responsibility — to make investment decisions for their portfolios based on ethical principles, legally codifying what has been a growing concern for nonprofits.
The case was brought by the Ashden Trust and the Mark Leonard Trust against the Charity Commission for England and Wales to argue that nonprofits can exclude companies from their portfolios for failing to act in line with the Paris Agreement on climate change — even if this involves financial risk by excluding a large part of the market. But judge Michael Green laid out a more general clarification of the law, which gives a much wider scope for nonprofits to make such decisions.
“Where trustees are of the reasonable view that particular investments or classes of investments potentially conflict with the charitable purposes, the trustees have a discretion as to whether to exclude such investments and they should exercise that discretion by reasonably balancing all relevant factors,” he said in a judgment issued April 29.