Choosing an ethical investment manager is one of the most consequential decisions a trustee board will make. It is also one of the most commonly misunderstood. The selection process is not primarily about finding a manager with the right language on their website. It is about identifying a partner who can demonstrate, in concrete and verifiable terms, that their approach to ethics, governance, and financial stewardship will work in the interests of your charity.

Three things trustees should keep in mind:

• Delegating investment decisions to a discretionary manager does not transfer trustee responsibility. You remain accountable for oversight, monitoring, and compliance with your charity's investment policy.
• The right question is not "are you ethical?" but "how do you evidence ethical alignment with our purposes, and what happens when a holding falls short?"
• For churches and charities, financial prudence and ethical commitment are not competing priorities. The Charity Commission's CC14 guidance expects trustees to consider both together.

This framework is designed to help trustees move beyond surface-level due diligence and make a selection decision that is legally sound, mission-aligned, and defensible to your beneficiaries and stakeholders.

1. Start with your charity's own duties and objectives

Before comparing managers, trustees need to be clear about what their charity actually requires. A manager can only be assessed against a standard you have already set. Under the Charity Commission's CC14 guidance, trustees must act in the charity's best interests, be sufficiently informed, and manage any conflicts of interest. That obligation starts with your own governance, not with the manager's pitch.

Before approaching any investment manager, trustees should be able to answer the following questions:

• What does your governing document say about investment powers? Some charities have specific restrictions or requirements that must be reflected in any manager appointment.
• What are your investment objectives? Growth, income, capital preservation, or a combination - and over what time horizon?
• What is your charity's attitude to risk and liquidity? How quickly might you need to access funds, and what level of volatility is acceptable?
• What are your ethical priorities and exclusions? Which sectors, activities, or companies conflict with your charitable purposes or reputational interests?
• How will you monitor and review the manager's performance? Oversight arrangements should be defined before appointment, not after.

A written investment policy statement provides the foundation for all of this. Without it, trustees lack the consistent basis needed to assess and compare providers objectively.

2. Test whether the manager's ethical approach is specific, governed, and practical

The most important distinction trustees can make is between a manager who talks about ethics and one who can show how ethics actually operates within their investment process. According to the Newton Charity Investment Survey 2023, 64% of UK charities now use targeted ethical exclusion policies. The sector has moved on from general responsible investment commitments to specific, evidenced approaches. Trustees should expect the same rigour from any manager they appoint.

The 2022 Butler-Sloss v Charity Commission ruling reinforced that trustees have wide latitude to exclude investments reasonably viewed as conflicting with their charitable purposes. The judgment made clear that the primary and overarching duty of trustees is to further the purposes of the trust. That latitude, however, comes with a corresponding responsibility to choose a manager capable of implementing that approach in a disciplined and documented way.

Use the table below to distinguish substance from positioning:

Generic ESG claim	Evidence trustees should ask for
"We take a responsible investment approach"	A written ethical investment policy with specific exclusion thresholds and screening methodology
"We engage with companies on ESG issues"	A published stewardship report showing voting records, engagement outcomes, and escalation decisions
"We screen out harmful sectors"	Named exclusions, revenue tolerance thresholds (e.g. less than 5%), and the data sources used
"Our approach is tailored to your values"	Evidence of how the policy has been adapted for other charities with similar purposes or theological commitments
"We align with responsible investment principles"	Explanation of how those principles translate into specific portfolio decisions relevant to your charity

A manager who cannot answer these with specificity is relying on positioning, not process. For churches and faith-based charities in particular, generic ESG labels are rarely sufficient. Ethical alignment should be grounded in the charity's own purposes, not borrowed from a standard framework.

3. Look beyond ethics alone - sector expertise and governance matter just as much

Ethical credentials are necessary but not sufficient. A manager who understands responsible investment but has limited experience of the charity sector may still be poorly equipped to serve your board. Trustees need a manager who understands how charities operate as institutions: their governance structures, reporting obligations, the distinction between restricted and unrestricted funds, and the practical needs of a trustee board or finance committee.

CC14 guidance specifically directs trustees to assess a manager's experience of managing charity investments alongside their investment selection process, fees, and ability to adapt their approach to suit the charity's needs. When conducting due diligence on sector expertise, trustees should examine:

1. Charity-specific experience - Does the manager work exclusively or predominantly with charities and churches? Do they understand the regulatory context, including Charity Commission and OSCR requirements?
2. Reporting quality - Are performance reports clear and accessible to trustees with varying levels of financial expertise? Do they cover both financial returns and ethical alignment?
3. Communication and access - Will you have a named, senior point of contact? How often will formal reviews take place, and can trustees make contact between scheduled meetings?
4. Fees and contract terms - Are charges transparent and clearly explained? Is the scope of delegated authority set out in a formal investment management agreement?
5. Fund structure and eligibility - Are the manager's funds structured specifically for charities, or are they adapted from products designed for other clients?

A manager built around charity clients will approach governance, reporting, and communication differently from one that serves charities as a secondary market.

4. Make sure the manager can support accountability after appointment

Appointment is not the end of trustee responsibility. CC14 is explicit: trustees must independently review their investment manager's performance, assess whether the manager is complying with the charity's investment policy, and consider whether the terms of appointment remain appropriate. This is not a one-off exercise. It should happen at regular, defined intervals.

The practical implication is that trustees should assess a manager's accountability infrastructure before they appoint, not after. A manager who makes ongoing governance easy is a material advantage.

Before appointing a discretionary manager, trustees should be satisfied that:

• Performance reporting is provided at least quarterly, with clear benchmark comparisons
• Holdings and ethical exposure can be reviewed at any time, not just at annual meetings
• Stewardship activity, including voting records and engagement outcomes, is reported regularly
• There is a clear process for raising concerns if a holding appears to conflict with the charity's ethical policy
• The investment management agreement sets out the manager's responsibilities, delegated authority, and review process in writing
• The manager will support trustees in keeping the investment policy statement current as the charity's objectives evolve

The broader point: according to the Newton Charity Investment Survey 2023, 66% of charities favour active engagement over divestment for climate-related issues. That preference only works if the manager is reporting engagement activity in enough detail for trustees to assess whether it is producing results. Reporting is not an administrative courtesy - it is a governance requirement.

5. What this means in practice when trustees compare providers

When trustees apply this framework, the field narrows quickly. Many investment managers offer responsible investment options. Fewer can demonstrate that their ethical process is specific, governed, independently overseen, and genuinely adapted to the purposes of a charity or church. Fewer still can show that their reporting and communication infrastructure is designed around the governance needs of a trustee board rather than a private client.

The Butler-Sloss judgment confirmed that the primary duty of trustees is to further the purposes of the trust, not simply to maximise risk-adjusted returns. That means the choice of investment manager is itself a purposeful decision, and trustees are entitled to hold providers to a high standard of evidence.

Questions to take into your next review meeting:

• Can you show us your written ethical investment policy and explain how it applies to our portfolio?
• How do you evidence stewardship activity - and what has changed in a holding as a result of your engagement?
• How is your reporting designed to support trustee governance, not just financial oversight?
• What experience do you have working with charities of our size, sector, and ethical commitments?

At Epworth Investment Management Ltd (“Epworth”), we work exclusively with UK charities and churches. We are happy to review your current manager relationship, assess whether your portfolio reflects your ethical policy, and discuss whether our discretionary service is the right fit for your organisation. Get in touch to arrange a conversation with our team.

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.