Aligning Investing Purpose to Institutional Mission and Culture
An increasing number of nonprofit organizations are implementing mission aligned investing and this approach may soon become an expected best practice. Core investment acumen will always be focused on safety, liquidity, and return on investment (ROI), balancing the risk/reward of these three key investment pillars. However, many nonprofits with investable funds now consider mission aligned investing as an important fourth pillar of their investment strategy.
Safety, liquidity, and ROI are well understood investment risk/reward criteria that are stable in concept, but which fluctuate based on the organization’s risk tolerance (conservative vs. aggressive). Mission aligned investing (MAI) is a “thematic” investment concept open to very broad interpretation, beliefs, and applications. These aspects of MAI become even more complicated when you layer in conservative vs. aggressive methodologies.
MAI is generally defined as investing financial assets to advance the mission of the organization and its constituents while also aligning with institutional culture and values.
There are many MAI strategies. It is important to become familiar with these strategies as they are currently understood and applied by nonprofits so you can make an informed decision about which strategies best align with your organization’s mission, vision, and culture.
I recently attended a presentation by Rob Olcott of The Olcott Group, in which he highlighted four commonly used MAI strategies, defined as follows:
“ESG looks at the company's environmental, social, and governance practices, alongside more traditional financial measures.”
“Socially responsible investing (SRI) involves actively removing or choosing investments based on specific ethical guidelines.”
“Impact Investing looks to help a business or organization complete a project or develop a program or do something positive to benefit society.”
“Sustainable Investing refers to investing in companies with the potential to promote/advance sustainable business practices and positive impact (e.g., alternative protein sources).”
Rob suggested that these strategies be considered from two perspectives:
Do no harm: ESG and SRI.
Do good: Impact Investing and Sustainable Investing.
I like this framing because it highlights the different approaches and goals of these strategies, which can help an organization to pick and use multiple MAI strategies when appropriate. For example, an organization advocating for opportunities and advancement for seniors in the workforce could apply both an Impact Investing strategy (investing in companies and educational institutions that support senior workforce development) and an SRI strategy (avoiding investing in companies that have limited number of seniors employed).
Planning Tip – Assume that your organization will explore multiple mission aligned investment (MAI) strategies and that both the definitions of these strategies and how they are applied will evolve over time. Consequently, it is important to consider MAI strategies as “guidelines” to help select, monitor, and judge performance of investments rather than compliance criteria in the investment policy statement (IPS). MAI strategies are by nature esoteric and open to different interpretations and measurement practices, so exact compliance measurements will most likely not be available.
Whether your organization is already using MAI strategies or considering them for the first time, make sure to fully engage the investment committee, Board, and even staff in the education and discussion process. When considered fully and implemented with care, MAI strategies will impact not only an organization’s reputation but also shows how serious an organization supports and believes in its mission. Thus, an organization’s approach to MAI will be a direct reflection of its culture.
