For many charity trustees, investment decisions sit in an uncomfortable space: you have a legal duty to manage your charity's assets prudently, but you may not have a background in finance. You are accountable to your beneficiaries, your donors, and the Charity Commission — and the choices you make about where to invest can have a material impact on your charity's long-term sustainability.

The good news is that the landscape for charity investment in the UK has matured considerably. There is now a wide range of investment options available, from straightforward cash deposits to diversified multi-asset funds, many of which are designed specifically for the charity sector. Equally important, the Charity Commission's updated guidance (CC14) has clarified that trustees can invest in a way that reflects their charity's values without compromising their fiduciary duty.

The core question for trustees is not simply "what returns can we achieve?" but "what investment approach serves our charity's purposes, values, and long-term needs?"

This guide sets out the main investment options available to UK charities, the key considerations trustees should weigh, and how a specialist investment manager can help you build an approach that works for your organisation.

Your Duties as a Trustee: The Legal Starting Point

Before exploring specific investment options, it is worth grounding the conversation in what the law requires. The Charity Commission's guidance for trustees, known as CC14, sets out the framework within which all investment decisions must sit.

As trustees, your principal duty is to further your charity's purposes. This means investment decisions must be made in the best interests of your charity — not based on personal preferences, and not in a way that conflicts with what your charity exists to do.

What CC14 Requires

The updated CC14 guidance identifies five broad approaches that a reasonable trustee body might take:

1. Maximising financial return within an agreed level of risk
2. Avoiding investments that directly conflict with your charity's purposes (negative screening)
3. Avoiding investments that could damage your reputation or reduce donor support
4. Applying ESG criteria to manage risk and strengthen long-term performance
5. Using shareholder influence to engage with companies on governance and conduct

No single approach is mandated. The balancing act is yours to make, informed by your charity's governing document, its purposes, and the needs of its beneficiaries. Crucially, the updated guidance confirms that a responsible investment approach is entirely compatible with your trustee duties — provided your decisions are evidence-based and properly documented.

Key point: Trustees should also check their governing document for any specific investment restrictions or requirements. These take precedence and must be followed.

For a deeper look at how to navigate the Charity Commission's expectations, our guide on navigating Charity Commission expectations on investment covers this in detail.

The Main Investment Options for Charities

The range of investment options available to charities is broader than many trustees realise. Below is an overview of the main categories, along with the key characteristics relevant to charity investors.

Investment Type	Typical Risk Level	Liquidity	Best Suited For
Cash deposits / money market funds	Low	High	Short-term reserves, operational cash
Fixed income (bonds, gilts)	Low to medium	Medium	Income generation, capital preservation
Equities (shares)	Medium to high	Medium to high	Long-term growth
Multi-asset funds	Variable (managed)	Medium	Most charities; balanced risk and return
Property	Medium	Low	Larger charities with longer time horizons
Social / impact investment	Variable	Low	Charities seeking to further purposes directly

Cash and Short-Term Deposits

Cash is the most straightforward option and appropriate for funds your charity needs to access in the near term. Common deposit funds and money market funds offer slightly better returns than standard bank accounts while maintaining liquidity. However, holding too much in cash over the long term carries its own risk: inflation erodes the real value of reserves, and the opportunity cost of not investing can be significant.

Industry data shows that over a 10-year period, a blended mixed-asset portfolio has historically returned significantly more than cash alone. According to data from the Charities Aid Foundation, the IA Mixed Investment 40–85% Equity sector returned 73.1% over 10 years, compared to just 12.4% for the IA Standard Money Market sector. For trustees sitting on large cash reserves, this gap is worth examining carefully.

Fixed Income (Bonds and Gilts)

Bonds and gilts provide regular income with relatively lower volatility than equities. UK government gilts are considered among the lowest-risk options; sterling corporate bonds offer higher yields in exchange for slightly more credit risk. Fixed income is often used as a stabilising component within a diversified portfolio, balancing out the volatility of equity holdings.

Equities

Shares in listed companies offer the highest long-term growth potential but come with greater short-term volatility. For charities with a longer investment horizon and sufficient reserves to weather market fluctuations, equities form an important part of a well-constructed portfolio. Responsible investment approaches allow trustees to screen out sectors that conflict with their charity's purposes — such as fossil fuels, tobacco, or weapons — without necessarily sacrificing returns.

Multi-Asset Funds for Charities

For most charities, particularly those without a large in-house investment function, a pooled multi-asset fund is the most practical route to a well-diversified portfolio. These funds, which include Charity Authorised Investment Funds (CAIFs) and Common Investment Funds (CIFs), combine multiple asset classes under professional management. They offer:

• Diversification across equities, bonds, property, and other assets
• Professional management without the need for in-house expertise
• Cost efficiency through pooled buying power
• Ethical screening where the fund mandate includes responsible investment criteria

At Epworth Investment Management Ltd (“Epworth”), our Multi-Asset Fund for Charities is built specifically for UK charities and churches, combining diversified investment with rigorous Christian ethical screening. It is designed for trustees who want both financial performance and alignment with their values.

Social and Impact Investment

Social investment allows charities to pursue their purposes directly through their investments — for example, by lending to social enterprises or investing in community housing. The Charities (Protection and Social Investment) Act 2016 introduced a statutory power for charities to make social investments. Returns may be lower than purely financial investments, but the direct alignment with charitable purposes can be a compelling reason to include a social investment element in a wider portfolio.

Responsible Investment: Aligning Your Portfolio With Your Values

One of the most significant shifts in charity investment over the past decade is the growing confidence among trustees that responsible investment is not a compromise — it is a legitimate, legally supported approach that can serve both financial and charitable goals.

The Charity Commission's updated CC14 guidance removed the word "ethical" in favour of "responsible investment", reflecting a broader, more enabling framework. Trustees can now apply values-based screening, ESG criteria, and shareholder engagement strategies without fear that they are breaching their fiduciary duty, provided their decisions are grounded in the charity's best interests.

What Responsible Investment Looks Like in Practice

There are several distinct approaches, which can be used individually or in combination:

• Negative screening: Excluding sectors or companies that conflict with your charity's purposes or values — for example, arms manufacturers, gambling companies, or fossil fuel producers
• Positive screening: Actively selecting companies with strong environmental, social, or governance records
• ESG integration: Incorporating ESG data into investment analysis to identify risks and opportunities that traditional financial analysis might miss
• Stewardship and engagement: Using shareholder rights to influence company behaviour on issues such as climate, executive pay, or human rights

For faith-based charities and churches, responsible investment goes a step further. At Epworth, our investment approach is rooted in Christian ethical principles, applying screens that reflect the values of the communities we serve. We have been managing investments for churches and charities for decades, and our approach has been shaped by that experience.

The misconception that responsible investment means accepting lower returns is not supported by the evidence. Long-term studies consistently show that well-screened, diversified portfolios can match or exceed the performance of unconstrained equivalents, particularly when ESG factors are used to identify systemic risks.

If you are unsure what responsible investment means in the context of your charity, our guide on what ethical investment actually means is a useful starting point. For those looking to formalise their approach, we also cover what to include in your ethical investment policy.

Key Considerations Before You Invest

Choosing the right investment option is not purely a question of asset class. Before committing to an approach, trustees should work through a set of foundational questions that will shape every subsequent decision.

Define Your Investment Objectives

What is the money for? Is it long-term endowment that should grow over decades, or reserves that need to remain accessible? Are you primarily seeking income to fund current activities, or capital growth to build the organisation's financial resilience? The answer to these questions determines your time horizon, your risk appetite, and the types of investment that are appropriate.

Understand Your Risk Appetite

Risk tolerance for charities is not just about financial volatility. Trustees must also consider:

• Liquidity risk: Can you access funds when you need them?
• Reputational risk: Could certain investments damage donor relationships or public trust?
• Mission risk: Do any investments directly or indirectly conflict with your charitable purposes?

A well-constructed investment policy statement (IPS) should document how you have thought through each of these dimensions. Our guide on what trustees need to know about charity investment policy statements walks through the key components.

Seek Professional Advice

The Charity Commission expects trustees to take professional investment advice unless there is a good reason not to. This is not a bureaucratic formality. A specialist investment manager who understands the charity sector — including the specific legal framework, tax treatment, and the nuances of responsible investment — will help you avoid costly mistakes and build a more coherent strategy.

The key questions to ask any investment manager before appointing them are covered in our guide on top questions every charity should ask their investment manager.

Discretionary vs Advisory Management

When working with an investment manager, trustees can choose between two models:

Model	How It Works	Best For
Discretionary management	The manager makes day-to-day investment decisions within an agreed mandate	Trustees who want professional oversight without ongoing decision-making involvement
Advisory management	The manager provides recommendations; trustees make final decisions	Trustees who want more direct control and have investment expertise on the board

For most charity trustees, discretionary management offers the right balance of professional expertise and trustee accountability. The key is ensuring your mandate is clearly defined — including any ethical or values-based requirements.

How Epworth Can Help

At Epworth Investment Management, we specialise in investment management for UK charities and churches. As part of the Methodist Church's Central Finance Board, we manage around £1.3 billion in assets and have a long track record of combining rigorous investment management with principled ethical screening.

We offer two core services for charities:

• The Epworth Multi-Asset Fund: A pooled, diversified fund with Christian ethical screening built in, designed for charities that want professional management without the complexity of a bespoke mandate. It is particularly well-suited to smaller and mid-sized charities that want access to institutional-quality investment management.
• Discretionary Charity Service: A customised, individually managed portfolio for charities with more complex requirements — whether that is a specific ethical mandate, a particular income target, or a large endowment that requires bespoke asset allocation. You can learn more about this in our guide to the Epworth Discretionary Charity Service.

What distinguishes our approach is that values-based investing is not an add-on for us — it is the foundation. We do not offer a standard portfolio with an ethical overlay. Our screening, our stewardship activity, and our engagement with companies are all integral to how we manage money.

We also understand that trustees are not always investment specialists. Part of our role is to make the decision-making process clearer and more manageable, helping you build an investment policy that reflects your charity's purposes and satisfies your obligations to the Charity Commission.

If you are reviewing your charity's investment approach, or starting from scratch, we would welcome the opportunity to talk. Get in touch with our team to discuss your charity's specific needs and how we can help you invest with both purpose and performance.

Epworth Investment Management Limited (“Epworth”) is authorised and regulated by the Financial Conduct Authority (FCA Registered Number 175451). It is incorporated in England and Wales (Registered Number 3052894), with a registered office at Methodist Church House, 25 Tavistock Place, London WC1H 9SF and is wholly owned by the Central Finance Board of the Methodist Church. Epworth-managed funds are designed for long term investors. The value of units in funds can fall as well as rise and past performance is not a guide to future returns. The level of income is also variable and investing in Epworth

funds will not be suitable for you if you cannot accept the possibility of capital losses or reduced income. Any estimates of future capital or income returns or details of past performance are for information purposes and are not to be relied on as a guide to future performance.