INVESTING/PORTFOLIO STRATEGIES

Lack of options poses challenge for non-profits’ mission-related investing — report

A lack of adequate investment options is the biggest challenge in implementing mission-related investment programs, according to non-profit institutional investors surveyed by Cambridge Associates.

Of the 50 survey respondents who participate in mission-related investing, 58% cited a limited investment universe as a challenge, followed by personnel capacity/resource constraints (40%), and concerns about fiduciary responsibilities (18%), said Cambridge’s survey report released Wednesday. Respondents could select more than one option.

A total of 159 Cambridge clients were surveyed in early 2016. Only 50 reported that they participate in mission-related investing; the remaining 109 reported that they do not. Cambridge defines it as “using investments to directly achieve, or be aligned with, an institution’s mission goals.”

For the 109 survey respondents who do not participate in mission-related investing, 42% each cited a perceived negative impact on financial performance and addressing their mission through programmatic activities, opposed to investment policies, as their reasons for not participating.

Among those with mission-related investment programs in place, 44% said they have increased their allocation over the past five years and 62% said they expect to increase their allocation over the next five years. None expect to decrease their allocation to those programs.

Key areas of focus cited by these investors were the environment and climate change (cited by 40%), health care/health and wellness (36%) and community investing (28%).

Although the environment and climate change were cited as a key focus area, only 30% of mission-related investors said they currently consider climate risk in their investment decisions.

Among those with mission-related investing programs in place, other key findings include:

  • The most popular strategy is negative screening (employed 72% of institutions), followed by environmental, social and governance strategies (62%) and impact investing strategies (44%);
  • 26% of mission-related investors engage in active ownership strategies; and
  • Financial results were cited as the most important measure of a program’s success (cited by 25 institutions).