Organizational Management: Using an Investment Policy Statement to Promote your Mission

Posted by Matthew Thomas

Organizations often place a list of types of companies they won’t invest in somewhere in their Investment Policy Statement. This is sometimes called the “embarrassment list.” In other words, it is the list of companies and/or company types that we would be embarrassed by if our constituency / the general public / key donor-contributors / competitors found out we are invested in.

As we have previously mentioned, it’s important to have a good handle on what that list is, and to review it regularly, comparing it to the funds in which we are invested. Nevertheless, it is possible for socially, civic, or values-minded organizations to take these investment screens one step further than mere avoidance of embarrassment (as important as that is). 

Instead of merely avoiding unwanted bad press, how about considering which companies, and which kinds of companies genuinely promote your organization’s values?  Whether your organization is a for-profit business with reserves to invest, or a non-profit or religious organization, you can use your funds to promote your values.

Granted, the more specific you become in your investments the more actively you have to manage your funds. And granted, the more you invest in specific companies the more your diversification risk grows. Nevertheless, it is possible to invest actively without becoming over-invested in one company, or driving investing costs through the roof by fiddling with your portfolio on a daily basis.

Values investing can go beyond embarrassment avoidance – but should still be investing. It is still important to screen funds based upon their financial performance first, before applying social screens – both pro and con.  This is because, in the end, your organization’s board is still responsible for the financial health of your organization, no matter the other causes you are trying to promote.  A company with great values but a terrible business plan is still an investment too risky to take in most cases.

When you seek out investment in companies that share your values, you have the opportunity to promote your values beyond your immediate sphere of influence: you provide ownership and additional funding to the types of values and business practices you desire to promote. 

Interested in help navigating the risks and pitfalls of values investing? Contact us! Just click the button below. 

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Topics: nonprofit leadership, Matthew Thomas, Design Group International, Financial Governance, Investment Policy Statement

Organizational Management: Why Reviewing (and Enforcing) your Investment Policy Statement will Save you from Certain Headaches

Posted by Matthew Thomas

Shortly after the tragedy in Newtown, Connecticut this past December, CNN ran a story outlining the institutional investment by the California State Teachers’ Retirement System into the makers of assault rifles and other firearms.  (

After the story broke, the private equity fund behind the CalSTRS investment, Cerberus Capital Management, moved quickly to sell the firearms group. (

CalSTRS has an investment policy statement, titled “Statement of Investment Responsibility” ( which outlines the basic philosophy and values of the CalSTRS funds.

In this case, CalSTRS either didn’t know that it was invested so significantly in a fund that owned an assault weapons company, or, prior to the Connecticut tragedy, investment in such a fund didn’t raise a whole lot of attention that would lead to divestment.

Either way, now that people are taking swift action to sell the California State Teachers’ Retirement Fund’s stake in the assault rifle business, organizational / institutional investors are reminded of the risks associated with investing that go beyond the dollar value of the investments.

Organizational and institutional investors should review the contents of the funds in which they are invested on a regular basis.  Funds add and subtract particular companies regularly, and disclose big-picture holdings in their prospectuses.

In addition, organizations need a clear “including, but not limited to” type list of companies from which they will limit or restrict their investment in their Investment Policy Statement, so that they can maintain good accountability with the funds investing on their behalf.

Choice of investment is often not made easy by investment funds, which often package funds solely on risk tolerance factors other than social consciousness. Nevertheless, most larger firms offer a socially-conscious fund that assembles the stocks of companies that operate outside most standard socially-conscious red flags. 

Moreover, organizations and institutions should consider investing not just to avoid embarrassment when a social issue develops: consider how your organization might invest to extend your values beyond your institution’s work into its asset allocation.

Interested in help in navigating the risks and pitfalls of organizational investing? Contact us! Just click the button below.


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Topics: nonprofit leadership, Matthew Thomas, Design Group International, Financial Governance, Investment Policy Statement

Organizational Management: Your Organization Needs an Investment Policy Statement

Posted by Matthew Thomas

Let’s face it: people have a wide variety of views and practices when it comes to managing money.  People have varied risk tolerances, varied spending habits, differing views of savings or reserves, differing approaches to appropriate efforts of creating income, differing needs or desires for accountability, record-keeping, and reporting. Couples often dispute over money matters more than anything else. 

So drawing together a group of people into a board to govern your organization’s funds could lead to quite differing views on how to manage the organization’s finances.  In order to come to some level of consensus, and measure results by reasonable action rather than by gut, your organization needs a commonly-developed, written policy for how it will invest its funds.  In addition, by the time your organization gets around to trying to invest actual money with a broker, mutual fund, exchange-traded fund, particular stock or bond, or other non-cash property, you will likely get nowhere before you have a formal investment policy statement.

An Investment Policy Statement defines

  • the role of the governing board or committee relative to the funds being managed
  • the investment objective(s)
  • how the money in the fund(s) may be spent
  • how the money will be invested – including asset allocation, rebalancing, diversification
  • what types of companies the organization wants to invest in or avoid investing in due to its mission / values
  • what investment practices are proscribed or otherwise to be avoided
  • metrics for measuring fund performance
  • metrics for measuring broker/vendor performance

Taken together, the items listed above cover the main issues most organizations face. Not only does this provide an investment bank with the legal wherewithal to do investing on the organization’s behalf, it compels the organization to work through its basic perspective on investing and come to a level of organizational agreement.

For a very good sample Investment Policy Statement, check out Vanguard’s:

If you would like assistance developing an investment policy statement or help developing your organization’s financial governance, please contact us! Just click the button below.


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Topics: nonprofit leadership, Matthew Thomas, Design Group International, Financial Governance, Investment Policy Statement