Sustainable Portfolio Management for Charities, Trusts, and Endowments
Whether you’re a casual investor, a high net worth individual, a non profit institution, or someone trying to make a difference in the world, sustainable portfolio management for charities, trusts, and endowments is the solution you’re looking for. We all share this planet, so we must all play a part in safeguarding it.
Regular portfolio management involves developing and monitoring investment strategies for a client when taking into account all of their assets, inclusive of bonds, stocks, real estate, collectibles and more. Sustainable portfolio management means directing those resources to investing in or supporting companies and assets that will create positive change in the world. Sustainable portfolio management can be built using positive or negative screening. Positive screening would be actively seeking and investing in charities, trusts, and endowments that promote sustainability, diversity, and equity. This can include anything from investing in a company that builds solar panels to a charity that supports women’s rights. A negative screen means refusing to invest in companies or institutions for their industry or practice, such as refusing to invest in fossil fuel companies. Sustainable portfolio management should reflect the values and priorities of the investor.
Creating and utilizing a sustainable investment portfolio for your charity, trust, and endowments is a great way to establish a long-lasting, positive legacy.
Nonprofit Investing
Investing in nonprofits is a key part of sustainable portfolio management. Nonprofit organizations strictly invest their earnings into their work rather than building monetary benefits for themselves, making them key players in environmental, social, and governance (ESG) investing. Investing in nonprofits that support these goals help foster the growth of developments in both innovation and sustainability.
Often, nonprofits will have opened a brokerage account through which they can receive investments, and these will be seen as charitable gifts. These gifts can take the form of cash, stock, or bonds. Transfer to these nonprofit accounts as often done through wire transfers or an electronic transfers. Brokerage accounts are also a great way to invest while remaining tax-efficient. Nonprofit Investment Policy Statements must include the background of the organization, investment considerations (such as timeline and tax requirements), investment objectives, and asset allocation.
When choosing to engage in nonprofit investing, the investor must consider if the mission, values, and work of the nonprofit align with the sustainability values that they want to support. Most investments in nonprofits yield some sort of benefit, with often the most niche of investments having more risk. Having improved data, market monitoring and analysis are both areas of growth required to make sustainable investment more mainstream. Whenever an investment is being made, it’s important to consider the investor’s assets as well as the timeline desired for results. These factors will help determine which are the best nonprofits to invest in.
Sustainable Charity
Investing in a sustainable charity is an excellent way to support sustainable values. Charities often focus on improving welfare for those who need help, giving investments in charities a greater focus on the social aspect of ESG investing. Charities themselves are also often careful in who and what they invest in, avoiding investments that contradict with their mission. Recent data has begun to show that investing sustainably is producing returns and can protect investments, leading to a growing trend to invest in sustainable charities, trusts, and endowments.
Investors can often invest in building a donor-advised fund, which is an account that is dedicated to supporting charities. Donations through these accounts are irrevocable, and in addition to directly supporting a sustainable charity, also result in a tax reduction. Donor-advised funds are actually the fastest-growing method of giving to charity in the United States, due to being tax deductible and being easy to contribute to a wide variety of assets.
Like investing in nonprofits, one of the first steps of investing in sustainable charities is if their practices, values, and missions match with yours, the investor. When investing, it’s important to have your specific ESG values outlined and prioritized to get a better idea of which investment is most beneficial. This direction will also help guide managers and investment strategies. It’s also worth considering if an investor wants to invest in a sustainable charity generally, or provide a more direct contribution to a specific cause through an endowment.
Endowments
Creating or investing in endowments involves setting some money aside for it to grow over time, allowing for the development of sustainable funds. Endowments usually take the form of cash, though sometimes they can be bonds or other investments. These pools of assets grow thanks to interest from underlying invested funds. Endowments are specially designed to keep the original asset intact and therefore come with restrictions in usage. When established, there are also guiding documents that determine donor intent and other restrictions for use. Ultimately, endowments help build a pool of assets that an institution can use in the future.
Nonprofits, charities, universities, and other institutions use endowments to create assets that can be invested into any commitments that support their mission. Endowments help institutions remain sustainable by not having them constantly have to pull from their original assets, which helps them complete their missions in the long term. By becoming a donor of an endowment, the donor is investing in managing a sustainable portfolio when that money is directed to the right place, which has led to the term “impact investments” for such donations.
Professionally and Sustainable Portfolio Management
Egéa SRI specializes in managing sustainable portfolios for charities, trusts, and endowments. We have a team of highly talented and professional financial advisors to make sure your investments align with your values and the legacy you want to leave behind. Our Chartered SRI Counselors will help you make the most of your assets while also fostering positive change in the world. Start a free consultation with us, and we will get you on the path to sustainable investments today.
Disclosure:
Socially Responsible Investing (SRI) / Environmental Social Governance (ESG) investing has certain risks based on the fact that the criteria exclude securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
