Charities (Protection and Social Investment) Bill [HL]

Debate between Lord Watson of Invergowrie and Lord Cromwell

Wednesday 1st July 2015 Grand Committee

[Lord Cromwell]

Perhaps I may have one more try at this. I hear what the noble Lord says but I have to say to him that I think that trustees should be careful. Batting this aside and saying, “Oh, there will be scandals and mis-selling” is not the approach that perhaps he meant. I could offer one further comment that may be helpful. The FCA currently offers guidance to investors on proportional investing—that is, the sort of recommended amount that it would say you should put into a particular type of investment, be it a private equity fund, a structured product or whatever. Perhaps here there is something about which the Minister could talk to the FCA. A social investment could be a very exciting but possibly, in risk management terms, relatively modest part of an investment portfolio. I still stick to my dictum that trustees are required to be careful. On the prospect of the noble Lord giving me £100,000, I would be very happy to discuss it with him afterwards.

[Lord Watson of Invergowrie]

My Lords, I was slightly taken aback by the response of the noble Lord, Lord Hodgson of Astley Abbotts, to Amendment 20. We believe that these amendments would enhance the Bill. In respect of the noble and learned Lord, Lord Hope of Craighead, who is a signatory to Amendment 20, perhaps I may further record my congratulations on his election as Convenor of the Cross-Bench Peers. New Section 292C(2) to (4) covers the scope of the duty applying to trustees. This will apply in relation to social investments made after this part of the Bill comes into force, whether or not these were made by the exercise of the new statutory power. The duty in the Bill will require charity trustees that have existing powers to make social investments to adapt their current processes in so far as they do not currently comply with the duties set out in the aforementioned sections.

The Bill is not clear as to how the duty in new Section 292C would apply where the trustees delegate their power. We believe that Amendment 19 offers clarification on this point. The section does not take into account that larger charities are more likely to want to set a social investment policy at board level and delegate to staff the responsibility for putting the policy into practice when implementing individual transactions.

Amendment 20 adds two further requirements that charity trustees must consider before exercising the power to make a social investment. I can only echo the comments made by the noble Lord, Lord Cromwell: surely it is important that care is taken and that trustees are absolutely clear that they are doing what is in their charity’s best interests. This amendment would require trustees to reflect on what type of investment they are making and the associated level of regulation, risk, concentration versus diversification and the type of qualified advice that was taken, all of which seems to be sound common sense. I cannot ascribe to the chilling effect that the noble Lord, Lord Hodgson of Astley Abbotts, suggested.