Law on social investment 'unclear'

It said there is a risk that some charity trustees may be deterred from engaging with social investment “owing to the complexity and lack of clarity in the current law”.

The Commissionis also reviewing the circumstances in which charities with permanent endowment can use their endowment to make social investments.

Professor Elizabeth Cooke, the Law Commissioner leading the project, said: “Charities have a special place in society. The contribution they make is made possible, in part, by how they spend their money.

“Social investment is an important and developing area for charities. The reforms we are proposing would make social investment more straightforward legally. We are asking consultees: would our proposals help trustees to make the best of the opportunities offered by social investment?”

The Commission said social investment “is an important and developing area for charities, enabling them to meet their charitable objectives by combining investment and spending”.

It pointed out that charities are already involved in social investment and the existing law is not proving an impediment to them, but greater clarity on the legal position would be desirable.

The Law Commissionis a non-political independent body, set up by Parliament in 1965 to keep all the law of England and Wales under review, and to recommend reform where it is needed.