A new UK court ruling will help charities use the power of investment to tackle climate crisis. Heartfelt congratulations to our sister organisation Ashden Trust and to the Mark Leonard Trust for their success in a recent High Court Case, the judgement of which was published on 29 April.
The High Court has confirmed that charity trustees can align their investments with the goals of the Paris Agreement to avoid the worst impacts of climate change, even where this involves financial risk by excluding a large part of the market.
In the judgment, handed down on 29 April, High Court judge Mr Justice Michael Green has approved the Paris-aligned investment policies of the trusts.
It is the first time a court has confirmed that trustees can adopt such investment policies. It reinterprets case law dating back to 1992 which did not consider climate change and had previously concluded that charity trustees should maximise return on their investments and ought not to take into account ethical or moral considerations that could cause financial detriment to the charity – except in supposedly ‘rare’ circumstances where an investment directly conflicts with the charity’s purposes or indirectly conflicts with its work.
In response to scientific evidence of climate change, the trustees developed investment policies which exclude, as far as practically possible, investments not aligned with the goals of the Paris Agreement. Blessing the trusts’ efforts to combat climate change by adopting investment policies which prioritise climate concerns, the Judge signalled the potential for a dramatic shift in investment practice:
‘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 1.5°C rise in pre-industrial temperature.’
He added: ‘I believe that the decision to adopt the Proposed Investment Policy is sufficiently “momentous” to justify the court giving its blessing to that decision.’
Investment from charities has unique potential
The ruling of Justice Green (a fitting name) is an important step in helping charities move away from investing in fossil fuels and towards climate positive investments. And that’s a shift the world must accelerate. For example, a recent report by Sustainable Energy for All found that for the seventh consecutive year, the world is falling far short of the level of investment required to connect everyone with clean and affordable power.
In 2019 finance fell to USD 12.9 billion, less than one-third of the USD 41 billion estimated annual investment needed to attain universal electricity access by 2030.
So where Ashden Trust and Mark Leonard Trust lead, we hope many others will follow.
The judgment enables charity investors to begin adopting climate positive investment strategies; particularly philanthropic charitable investors who can act nimbly and make investments which can prove a business case or deliver the early successes of enterprises and organisations which can attract further investment.
To return to the issue of energy access, now-commonplace solutions like the sale of solar home systems in remote villages were once fringe ideas. Investment from pioneering individuals and organisations has helped solution providers scale up.
This week’s news will be welcomed by Ashden’s growing community of climate champions, whose trailblazing work in support of marginalised people is a prime candidate for socially-minded investment.
For charities as much as any organisation, the pursuit of financial returns should never derail or drag back progress towards a just and equitable low-carbon future.