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Industry voices

Taking a more proactive approach to socially responsible investing

Mike Breller
Mike Breller is managing director of Beacon Pointe Advisors’ institutional consulting group. He is responsible for business development and providing consulting services to the firm’s institutional clientele.

Your organization has an important mission, one that your team members fight to achieve on a daily basis. From grant writing and event planning, to fundraising and marketing, your organization is doing everything it can to champion its cause. But what about outside of those efforts? Many non-profit organizations have growing endowments and foundation investments pools. These investments can also be impactful to your mission and the work you do. Organizations may proactively support their mission through these investments by giving appropriate consideration to socially responsible investment policies and/or proactively including investments that meet environmental, social and governance criteria.

Your organization has an important mission, one that your team members fight to achieve on a daily basis. From grant writing and event planning, to fundraising and marketing, your organization is doing everything it can to champion its cause. But what about outside of those efforts? Many non-profit organizations have growing endowments and foundation investments pools. These investments can also be impactful to your mission and the work you do. Organizations may proactively support their mission through these investments by giving appropriate consideration to socially responsible investment policies and/or proactively including investments that meet environmental, social and governance criteria.

Socially responsible investing defined

Some organizations create a SRI policy to best match their mission. While this may not be a necessary step for many non-profits, doing so can certainly be advantageous for some, such as faith-based and health-care organizations. For example, many health-care organizations are choosing to create policies that strictly avoid alcohol and tobacco-based investments due to their detrimental health consequences. Unfortunately, many publicly traded companies attain revenues from sources that are the exact opposite of the important mission a non-profit foundation is trying to achieve. The purpose of a socially responsible investment policy is to avoid the types of investments that do not fit or directly conflict with your organization's goals.

Changing with the times

Rather than creating a policy based on avoidance, an increasingly popular approach to nonprofit investing is to do so with environmental, social and governance criteria in mind. This method differs from the standard SRI policy in that an organization is choosing to proactively invest in “good” companies because they will profit from sustainable, socially approved and transparent business activities in the new world.

Environmental criteria refer to the fact that as the times change, so do our environmental concerns. Consider this: our changing environment may well change the economic outcomes of mining, oil and utility companies — while this can be debated it is certainly something to consider. Regulatory carbon limits may put pressure on future revenue for these companies. Additionally, universities and others are coming under fire for maintaining allocations to “dirty energy.” At the same time, the outlook for clean energy is improving. While this may not have been the case a decade or so ago, an organization's investment portfolio may be positioned to benefit from this change.

Governance and Public Perception

Governance and social issues can ruin a company in today's fast-paced news cycle, especially when social media gets involved. Investing in these companies may tarnish your organization's public image and limit your ability to raise funds. For instance, news comes out that a top university has directly invested in a company that has a record of unfair employment practices. This reflects poorly on the university. Incorporating ESG considerations into your investment process may guard against these reputational and investment related risks.

Your organization's mission is a valuable asset to your stakeholders, community and beyond — make sure your investments are as well. Not sure of where to start? Work with a professional investment consultant that is experienced in creating socially responsible investment policies and incorporating ESG criteria into the investment decision making process. Perform the necessary due diligence to construct a portfolio of investments that reflect your organization's unique mission.

Mike Breller is managing director of Beacon Pointe Advisors' institutional consulting group. He is responsible for business development and providing consulting services to the firm's institutional clientele.