Among foundations and endowments that don't incorporate ESG, impact or mission-aligned strategies, nearly half of them haven't even considered doing so, according to the results of the most recent Endowment & Foundation Survey from CAPTRUST Financial Advisors.
The annual survey, which collected responses from 171 nonprofit organizations in August and September, showed that 31% are currently allocating assets to environmental, social and governance; impact; or mission-aligned strategies. But of those that aren't, 47% signaled that those strategies have not even been considered.
Reasons that respondents gave for not moving forward with such strategies is lack of a defined solution (23%) and complexity (16%), while expense (3%) and lack of manager track record (2%) were lower on the list of concerns.
And though specific impediments to investing in ESG, impact, and mission-aligned strategies remain for many nonprofit organizations, only 29% of such organizations not currently investing such strategies failed to allocate when no obstacles exist.
"In past years of the survey, we had typically seen a greater adoption of ESG, impact and mission-aligned investing among organizations with fewer assets. Now, larger organizations with more complex sets of stakeholders are catching up with their smaller peers," added James Stenstrom, endowment and foundation director at CAPTRUST, in a news release announcing the survey results.
For non-profit institutions that use ESG, impact or mission-aligned investing, 78% of respondents rely on negative screening. Additionally, though ready-made ESG products continue to proliferate, 83% of organizations use custom strategies to fit their priorities.
The survey also revealed that two-thirds of respondents deploy tactical asset allocation for their overall asset allocations, with those doing so in-house consistently underperformed those using an investment consultant or outsourced chief investment officer.
"Seventy-one percent of organizations surveyed rely on internal investment committees or a board of directors to determine their tactical asset allocations," Mr. Stenstrom said. "Especially in times of market volatility, there can be an advantage to working with dedicated, outside resources for investment advice, and we continue to see a greater number of nonprofits moving toward those services."
