3. Why have investments?

If your charity is preparing to invest for the first time, it’s worth reflecting on why a charity might want to have investments. Generally, it means a charity has decided to generate income and/or capital growth to support the delivery of its charitable activities. It may be that investing offers a more sustainable way of financing the charity’s activities. However, charity trustees need to understand what they are doing with the charity’s money, weighing up the various risks involved.

There are risks involved in both deciding to invest, or deciding not to invest. Financial markets can go up and down, and investment is never without risk, but doing nothing with the charity’s money can also be a risk since inflation causes cash to lose its real spending power over time. Investments might provide a longer term, valuable source of income if other funding streams are being reduced.  

If your charity already has investments, it can be helpful for charity trustees to take a moment to reflect and ask some questions. This will make sure the charity trustees understand the charity’s current position, which may be the result of decisions made by previous charity trustees.  

• What’s the background on why the charity is holding investments? 
  
  

• When were these investments acquired? 
  
  

• Were they gifted to the charity by a donor?
  
  

• Were they received as a result of some other windfall?
   

• What role do these assets play in supporting or delivering your charitable purposes?
  
  

• Were they given to the charity for specific purposes or projects?
  
  

• Are there any restrictions on what the charity trustees can do with the investments?