Principal, Social Impact Collaborative Consulting
Senior Consultant, Byrne Pelofsky
Foundations and nonprofit organizations have been engaging in impact investing since the 1960s. However, the last decade has seen the nonprofit sector take a greater strategic approach. By aligning endowments, investment portfolios, and cash management tools with mission-centered work, organizations are putting targeted social impact ahead of traditional rates of return on investments.
For foundations and nonprofit organizations, impact investing, also referred to as mission-related investing or program-related investing, represents a set of impactful tools used by a diverse range of organizations of all sizes and types to help make a difference in the communities they serve. By investing in ways that generate social and environmental benefit and garnering a financial return, impact investing helps organizations further their mission and compound their assets.
The world has changed drastically in the past two years. A global pandemic, an urgent need to respond to the impacts of climate change, and a resounding call to address the systemic racial and gender inequalities that exist throughout our systems, policies and institutions have become increasingly evident. Our decisions as consumers, investors, philanthropists, and citizens can have both positive and negative impacts. We can make decisions in ways that align our personal values and our organizational mission. Due to better data, transparency, and tools, we have an expanded ability to articulate our values through our assets. Organizations and foundations who consider this impact can shift their portfolios away from investments that can have negative impact or consequences on the communities they are aiming to serve and move toward positive opportunities that allow them to impact their mission and their chosen communities most authentically.
Impact investing is a powerful force that is reshaping how philanthropy defines its operating models. Consumers and donors are calling on corporations and organizations alike to take a closer look at all aspects of their business and take measures to fully optimize their social and environmental impact while maintaining sustainable financial practices. Many nonprofit organizations are rising to the occasion to creatively address these systemic global challenges and are realizing effective change through impact investing.
Many small to mid-size organizations don’t know where to begin or have a clear understanding of how to manage an impact investment portfolio. While many organizations rely on third party asset and portfolio managers to handle organizational investments, there is a lack of broad understanding of how to begin impact investing. If an organization has not already begun exploring avenues for impact investing, now is an opportune time to take the steps to further align ones community impact and financial investments, demonstrating to stakeholders the power of their investments and their ability to influence significant systemic change.
Here are a couple of steps to start the process:
Goal Setting: Start by having a conversation with the board of directors and finance and investment committees to identify the organizations’ goals and priorities in building a more impact aligned investment portfolio. The organization does not need to move its entire asset portfolio into impact investments. Perhaps start with a goal of 25% of assets aligned with impact and mission-related investments. If an organization uses a third party to manage assets, involve their asset or portfolio managers in conversations to better understand their experience and the resources available to help advance impact investing goals.
Cash Management: One way to begin impact investing is to consider investing organizational reserves or cash into underserved communities through a Community Development Financial Institution, identifying specific geographic areas of interest or support. CNote is a leading impact investing technology platform that provides a variety of impact investment products, and cash management solutions for institutional investors. CNote’s Impact Cash solution seamlessly allows for the deployment of cash into BIPOC and underserved communities, growing the deposit base, and supporting lending and other community development activities like low-income housing, child welfare, health care and poverty alleviation, when and where investments are most needed. Impact Cash investments allow for secure, insured investments that are having real-time impact in local communities.
There are many impact investment resources available to begin making a greater impact with an organizations’ assets beyond traditional grantmaking and direct service programs. The impact investing field continues to grow exponentially and provides a critical tool for fulfilling philanthropy’s role in achieving goals from all aspects of their work, whether addressing low-income housing needs, supporting behavioral health, or alleviating poverty through economic development. Without impact investing, the kind of systems change we need to solve the deeply persistent challenges and inequities of our time will continue to elude
Katie is a Byrne Pelofsky strategic partner in campaign planning and management. Katie has two decades of experience in the public, nonprofit and social impact sectors with special concentrations in civic engagement, grassroots community development and major gift fundraising . Her expertise in progressive and innovative fundraising solutions will ensure our clients have extended access to specialized knowledge and services. Click here to get in touch with Katie.