Bookmark and Share
Share
Home » Guides » Investment of Nonprofit Financial Assets

Investment of Nonprofit Financial Assets

Contents

Display to header level

- hide table of contents -

Investment of financial assets can provide a nonprofit with revenue and financial stability if accomplished thoughtfully and prudently. This brief guide provides hyperlinks to useful information regarding investment strategies, policies, management, and oversight.

Strategy

Organizations want to maximize their potential to receive a high rate of return on investments while minimizing the risk of losing money or receiving less than an acceptable minimum return. They can’t have it both ways. Seeking a higher rate of return increases the risk the rate won’t be achieved; seeking a lower rate decreases this risk, but also decreases earnings. Each organization must make its own decisions in balancing the pursuit of returns on investments and the risk of those investments delivering insufficient or even negative returns. Organizations also must consider their time horizons: are they prepared to lose money or receive minimal returns at points if there is a high probability returns will be higher in the long run?

Some organizations want to avoid investing in certain companies or industries to avoid supporting practices and actions counter to their values and conversely seek to invest in companies that produce positive social and environmental impacts. The efficacy of such “socially responsible” or “E.S.G.” (environmental, social, and governance factors) investing is open to question, but that discussion is beyond the scope of this guide.

An organization’s desired return on investments, tolerance for risk, available funds, cash flow needs, and interest (if any) in socially responsible investing will shape its over-all investment strategy.

Policy

A written investment policy statement describes an organization’s goals, guidelines, and decision-making processes regarding its investments. Practice 3.A.2.e. of Land Trust Standards and Practices requires a land trust board to adopt “written policies or procedures for the responsible and prudent investment, management, and use of financial assets.”

Oversight

Some organizations create a committee to oversee invest-ments, composed of board members and, in some cases, financial professionals. Others rely on the board of directors to oversee investments.

Investment Management

Many organizations do not have the time or expertise to manage investments themselves, so they use a financial advisor. Others decide to invest through a local community foundation, which pools their assets with those of other nonprofits.

Average
Your rating

Download as


See more...

Featured Library Items

Explains what is required of individuals who oversee and administer charitable trusts, endowments, and other nonprofit assets.
The board of directors of a nonprofit has a fiduciary responsibility to protect the assets of the nonprofit and ensure that the nonprofit's operations and activities use the assets to further the nonprofit’s mission. A prudent way to serve as fiduciaries of a nonprofit's assets may be to invest the…
While not specifically mandated in the federal or state regulations that govern nonprofit organizations, a carefully crafted and well-maintained investment policy statement is one of the best ways to document a prudent investment process.
Whether your organization is thinking about joining this select group of nonprofits, or whether it has only a few thousand dollars to invest, you will still need to consider how best to manage your assets. There is a common core of management issues that should be considered—legal fiduciary duties,…
According to the poll, the majority (76%) of nonprofit portfolios are governed by an investment committee that meets, on average, about four timesper year. Additionally, 41% of participating organizations reported using an investment consultant, and 18% use an investment outsourcing partner. About …
While a careful consideration of risk is at the heart of any investment strategy, nonprofits are required to invest in such a way that does not jeopardize their underlying functions — for example, by leaving them short of capital needed for annual spending on their charitable works, or even by tyi…
If you oversee investments for a non-profit, you must ensure that your organization’s invested money is safe. This is a list of questions to discuss with your current or prospective money manager. It is not designed to find the perfect money manager, but rather to help you and your organization ra…
Sample investment policies for nonprofit organizations.
A nonprofit may create an investment committee to oversee investments. There are underlying principles that should guide the work of all committees. This article suggests practices that investment committees of large and small organizations should consider, identifies what makes an investment comm…
Investment of financial assets can provide a nonprofit with revenue and financial stability if accomplished thoughtfully and prudently. This brief guide provides hyperlinks to useful information regarding investment strategies, policies, management, and oversight. WeConservePA guide. 2 pages.

Acknowledgements

WeConservePA produced this guide with support from the Colcom Foundation, the William Penn Foundation, and the Community Conservation Partnerships Program, Environmental Stewardship Fund, under the administration of the Pennsylvania Department of Conservation and Natural Resources, Bureau of Recreation and Conservation.

Disclaimer

Nothing contained in this document is intended to be relied upon as legal advice or to create an attorney-client relationship. The material presented is generally provided in the context of Pennsylvania law and, depending on the subject, may have more or less applicability elsewhere. There is no guarantee that it is up to date or error free.