Diane Manuel, CFP, a friend of Starfish Impact’s and Financial Advisor at Urban Wealth Management shares the following guest post about sustainable and responsible investing.
Nonprofits and foundations have been central to how we’ve grown and changed as a country. Their goals can include providing services, preserving history, and advocating for political changes. But, what about their financial assets? To what degree are their financial strategies aligned with their mission and goals?
Sustainable and Responsible Investing (SRI) has a long history in the United States. Since the 1700’s, religious organizations have been at the forefront of consciously avoiding investments in businesses and industries they deemed detrimental to society. Strong activist movements since the 1960’s have targeted various companies and industries advocating for changes in the status quo of various issues tugging at the heart and soul of many Americans: the Vietnam War, civil rights, consumer protections, and diversity in corporate America, for example.
It is the combination of activism and financial performance that represents the core of Sustainable and Responsible Investments. In addition to corporate profits and revenues, companies and industries are assessed for their social good. Filters, such as alcohol, tobacco and firearms, are traditionally eliminated from investment strategies. However, there is a growing movement that includes variables related to the environment, social good, and corporate governance (ESG). Additionally, foundations increasingly want the deployment of their investments to be impactful – and that impact be reflected both in their grantmaking and financial strategies.
What does this mean for board members? In addition to acting as a fiduciary, the board of a nonprofit should ensure that the organization’s values are reflected in their Investment Policy Statement. For example, an organization supporting clean energy, probably wants to avoid investments in fossil fuels.
Until recently, the prevailing thought was that investments in SRI/ESG strategies will underperform. However, there is a growing number of investment opportunities that allow investors to incorporate strategies that may not affect performance, or may even be beneficial.
A conversation with your Financial Advisor is imperative. He/she should provide options that reflect your values, performance goals, and risk tolerance. There are a variety of options available. Every nonprofit and foundation should be able to find a strategy that meets their needs.
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