Faith and finance: ethical investment, and how to have the conversation with your board

Faith organisations exist to embody values. So a fair question follows: do the values in the pulpit, the prayer hall or the meeting house also govern the reserves in the bank? For many faith-based charities, ethical investment — making sure the money is invested in line with the mission, not against it — is becoming an important conversation. This article explains what the law actually allows, and, just as importantly, how to raise the subject well with your board of trustees.

Why it matters for faith organisations

There's an integrity question at the heart of this. If an organisation preaches justice, care for creation or concern for the poor, but its reserves are invested in things that work against those values, the gap can quietly undermine its credibility — and trouble its own members.

Faith has deep roots here. Many traditions have strong teachings on money: the prohibition of riba (interest) in Islam, teachings on usury and justice across the Abrahamic faiths, and a shared emphasis on stewardship. It's no accident that faith bodies have often been pioneers of ethical and responsible investment — from church divestment from fossil fuels and arms, to the growth of Sharia-compliant finance, to long-standing faith-based ethical investment funds.

What the law actually allows

For years, some trustees worried they were legally required to chase the highest financial return, whatever the ethical cost. The law is now clear that this is not so.

In the Butler-Sloss case (2022), the High Court confirmed that charity trustees have discretion to exclude investments they reasonably believe conflict with their charity's purposes — and may choose to invest ethically even where that might mean a somewhat lower return. The catch is that trustees must act honestly, reasonably and responsibly: forming a proper investment policy in the charity's best interests, and, where there's a genuine tension, exercising good judgment by balancing the potential conflict against the risk of financial harm. The Charity Commission's guidance, CC14 — Investing charity money: a guide for trustees — reflects this position.

In short: faith organisations can align their investments with their values, lawfully. But they must do it properly — with a policy, with advice, and with the reasoning recorded.

The main approaches, in plain English

Ethical (or "responsible") investment isn't one thing. The common approaches are:

• Negative screening — excluding sectors that conflict with your values (for example arms, gambling, tobacco, high-interest lending, or fossil fuels).
• Positive screening / ESG — favouring companies with good environmental, social and governance practice.
• Engagement (stewardship) — staying invested but using your voice as a shareholder to push for change.
• Mission-aligned or impact investment — investing in things that actively further your mission, not just avoid harm.
• Sharia-compliant investment — for Islamic organisations, avoiding interest (riba) and prohibited sectors, often through specialist funds.

Most faith investors blend several of these.

Should faith organisations lead the way?

There's a strong case that they should: money that matches the mission is a matter of integrity, faith traditions give it deep grounding, and faith bodies have historically been at the forefront. But it's a genuine question for each board, not a foregone conclusion — because trustees also owe a duty to the charity's financial sustainability. The good news is that ethics and returns are not always a trade-off; the evidence on responsible investment performance is mixed and often comparable. The point is that trustees must weigh it thoughtfully, not ignore either side.

How to have the conversation with your board

This is where good intentions succeed or stall. A practical way through:

1. Start from purpose and values. Anchor the discussion in what your organisation stands for and its charitable purposes — not in personal politics. That keeps it a governance conversation, not a values fight.
2. Get the facts. Find out what you are actually invested in. Many trustees genuinely don't know — and it's hard to have the conversation without that.
3. Take advice. Speak to an adviser who understands charity investment and, where relevant, your faith's specific requirements (such as Sharia compliance).
4. Agree an investment policy statement. Put it in writing: your objectives, any ethical exclusions or priorities, and your expectations on risk and return. It's the single most useful step, and CC14 expects it.
5. Balance and record your reasoning. Where ethics and returns are in tension, document how you weighed them — Butler-Sloss asks for reasonableness and good judgment, and a clear record protects the trustees.
6. Review regularly, and be willing to phase change rather than doing everything at once.

A tone tip: bring evidence, be patient, and treat differing views around the table with respect. This connects to every trustee's financial responsibilities and, for Islamic organisations, to the wider stewardship questions we cover in stewarding your waqf.

The bottom line

Faith organisations are well placed to lead on ethical investment — and, since Butler-Sloss, they can do so with legal confidence, provided they act reasonably and record their thinking. The task for trustees is not to pick a side in the abstract, but to have an honest, well-advised conversation: what do we stand for, where is our money, and how do we bring the two into line while keeping the charity financially sound? Done well, it's simply good stewardship — making sure the mission and the money point the same way.

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This article is general information, not advice. Investment decisions carry financial and legal responsibilities and depend on your charity's circumstances; take regulated investment advice where appropriate. For help with the governance side, get in touch.

Sources verified (June 2026):

• Butler-Sloss & Ors v The Charity Commission for England and Wales [2022] EWHC 974 (Ch), 29 April 2022 (trustees' discretion to exclude investments conflicting with charitable purposes; balancing test) — https://www.bailii.org/ew/cases/EWHC/Ch/2022/974.html
• Charity Commission — CC14: Investing charity money: a guide for trustees — https://www.gov.uk/government/publications/charities-and-investment-matters-a-guide-for-trustees-cc14/charities-and-investment-matters-a-guide-for-trustees
• GOV.UK — Guidance on investments refreshed to help improve clarity and boost trustee confidence — https://www.gov.uk/government/news/guidance-on-investments-refreshed-to-help-improve-clarity-and-boost-trustee-confidence