Over £31bn charity money sat idle

The Cash Conundrum

Why are charities holding so much cash in the bank?

In today’s complex and volatile financial landscape, many charities find themselves grappling with elevated risks and challenges when it comes to sourcing funding and by default opt to keep their assets as ‘safe’ and as ‘liquid’ as possible.

The latest data from The Charity Commission suggests that 13% of the £250bn held in assets by charities with over £0.5m annual income is sat in cash. We should all take a minute to reflect on what that could mean for UK charities. That’s £31bn of charity assets potentially sitting idle.

Assuming all of this is held in a current account (not accruing interest or at low rates), that means there is potentially up to around £1.5bn of investment return foregone for the charity sector over the last year (assuming 5% return on £31bn of assets over a year), had this money been held in a typical Money Market Fund offering returns in line with market rates of interest.

Bank risk exists. There are plenty of examples over time where capital owners have been exposed to banking failures. So why is it investors have more confidence in banks than they do in investments?

Many, particularly smaller charities, may believe they lack the internal expertise or cannot afford the third-party support they need to make investments work for them. However, simple investments, such as Money Market Funds, offer the opportunity to access potentially higher returns than most traditional bank accounts without the volatility of more risky investments such as equities.

Instead, many charities opt to keep their capital in the bank which can, in contrast, restrict organisations from improving their capital position and supporting their charitable endeavours.

Fundamentally, when cash is kept idle, it fails to generate significant returns (especially during bouts of high inflation) and therefore loses value in real terms over time. Periods of economic volatility and currency fluctuations can also impact the value of cash holdings.

The lack of significant investment return from cash reserves can slow down the progress of charities, hindering their ability to fund their objectives and missions, particularly if they have an un-tailored and inflexible strategy in place to achieve their goals.

The Charity Commission’s published data, based on the annual returns of 12,973 charities during 2022 with annual income of over £0.5m, shows that 7,551 do not hold any long term investments. That’s 57% of the largest UK charities holding only cash and fixed assets such as land, buildings, equipment and vehicles.

Surprisingly, 59% of the assets held by these charities are unrestricted – meaning that they can be invested as the trustees see fit to benefit their charitable purpose. That’s £147bn in the UK economy that could be used to generate returns, drive impact through investing and provide charities the ability to increase societal benefits.

Fortunately, the underutilisation of cash is as easily avoidable as it is common. Essentially, investments can provide a higher potential for return and more impact than simply holding money in a bank. However, it’s critical to align these investments with the charity’s risk tolerance and financial objectives.

It is often said that cash is king, but does that ring true in the charity sector?

The charity sector plays a necessary and important role in advancing, supporting and advocating the needs of often overlooked causes, individuals and organisations.

However, we are increasingly seeing charities – big and small – holding their hard-earned capital in cash as they believe it’s the safest – most cost-effective – option to protect their funds.

But, in reality, this approach may be hindering growth and the successful accomplishment of their charitable aims rather than safeguarding it.

Many charities with commendable causes are foregoing opportunities to invest in simple, relatively secure vehicles that are straightforward, practical and likely to provide a good return, unlocking valuable capital.

Investing does not have to be synonymous with risk and complexity. In fact, it can open up avenues to promote individual charity objectives and ensure capital is working hard through mission aligned-investments.

Investing doesn’t need to be daunting

A frequent misconception is that investing requires the expertise to pick the highest returning investment vehicle. However, picking the highest returning investments in insolation is not necessarily the only consideration.

The Charity Commission’s Guidance (CC14) for trustees is that investment decisions should be made to “further your charity’s purpose”.

Charities are uniquely positioned to set their own objectives. Many charities hold cash in bank accounts as a way to avoid difficult decisions around investing, but the Charity Commission’s Guidance (CC14) has made it clear that cash counts as investments. So, no decision, is a decision.

What are the practical steps that charities should consider taking?

Set some objectives. It’s normally really clear how the capital of a charity benefits causes, people or places. What’s not always clear is how trustees can further those causes by using their capital more wisely. Setting objectives for your investments will help.

Avoid setting arbitrary objectives like “generate CPI + 4% p.a. over the long term”. Instead, set objectives that clearly relate to your cause. For example: “keep up with inflation to ensure our grant making continues to be effective by keeping up with rising project costs.”

Use your capital to align with your mission. Whilst capital might be useful to provide growth so trustees can better support their causes, there’s much more asset owners can do to unlock positive impact through their investments.

What is mission-aligned investing?

At its core, mission-aligned investing allows charity trustees to allocate capital towards investments that support the causes they are championing.

Rather than setting objectives for your assets to target a particular level of return, the Charity Commissions’ Guidance (CC14) has given trustees flexibility to invest for good. This way, even in a poor year for financial growth, charities can at least make note of the positive impact they made through their investments.

For example, charities aligned to medical improvements might want to see their investments in an equity fund that is heavily weighted towards the pharmaceuticals sector to improve the level of research and development in their portfolio. Equally, charities that provide end of life medical support might invest more of their assets in care homes or hospitals to help ensure patients have access to the best possible services.

A combination of investing for financial return whilst supporting causes that are aligned can add significant value.

Asset owners have the responsibility and ability to make this happen. Championing this direction of travel and pushing for investment solutions that align with a wider array of objectives will help create this change.

We’ve seen it happen before.

  • The UK called for ethically screened funds – done.
  • UK asset owners demanded more Environmental, Social and Governance screens applied to investments – managers changed their practises.
  • UK asset owners championing mission aligned investments – watch this space

Environmentally sustainable funds are increasingly common now in response to investor demand. But we want to see more funds that support social housing and welfare support to prevent homelessness, research and development into medical advancements across the developed and developing world, funds that invest to reduce racial inequalities and even funds that can promote animal welfare.

This doesn’t all fall on charity trustees.

Investment Consultants can provide the expertise and independent support a charity might need to help make their investments more effective. Mission aligned investing is a growing area, and Investment Consultants have a key role to play in working with charities and investment managers to develop and identify the right solutions.

We believe engagement between charity trustees and Investment Consultants can help charities make better use of their assets and create lasting benefits to their causes, whilst successfully ensuring the demands of funding short-term activities are delivered.


We believe that there is a significant amount of charity assets held in cash that could be put to much better use, even if this means earning higher returns through more efficient Money Market Funds.

By maximising the return from cash and aligning investments with their missions, charities can create a sustainable financial future that is much more impactful in supporting their work and objectives.

We’re on our own mission – helping charities get more from their money. We’d love to see this include impact investing and mission alignment.

Many charities and trustees will need help. Our aim is to support these groups and help them to make informed decisions about their assets which we believe can add significant value over time.


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