Socially conscious nonprofits reap ethical benefit

By Meg McGurk

Socially conscious investing and financial practices are the processes that use ethical or philosophical criteria as a basis for investment and financial decisions.

The process considers the social or environmental consequences of decisions, either positive or negative, and is known by several names, including socially responsible investing, ethical investing, socially aware investing, and mission-based investing.

Regardless of the name, it is an ethically-based investment approach that can potentially tie a nonprofit’s mission to its investment policies and general financial practices.

Some agencies use specific positive criteria like good labor policies to screen companies, or specific negative criteria like handguns to screen out a product.

Positive screening allows an agency to actively encourage and sustain practices and products that enhance its mission.

Essentially, the nonprofit is partnering with companies with respectable employee relations, strong records of community involvement, excellent environmental impact policies and practices, respect for human rights and safe and useful products.

Negative or avoidance screening tends to be more popular with nonprofits, particularly faith-based organizations.

These screens allow an agency to shape its financial practices to avoid supporting industries or products that are in direct conflict with their beliefs.

Many small nonprofits may not be able to fully participate in some of these socially conscious practices due to lack of funds or time, but those interested can:

* Create an investment committee of board members and outside experts.

* Survey board and staff to determine social or environmental issues that affect the agency’s mission.

* Determine if the agency’s approach to investing is long-term or short-term

* Decide on the level of equity and fixed risk the agency is willing to accept.

* Consider hiring a money manager who understands socially conscious investing and agency mission.

* Adopt a written investment policy that includes risk, both positive and negative screens, and other socially conscious financial practices

* As board-member terms change, consider reviewing the policy every three to five years.

Socially conscious practices take time, money and extra effort on behalf of the board of directors and the executive director and staff, but their ethical implications will far outweigh any immediate stressors.

Meg McGurk is a graduate student in the master of public administration program at N.C. State University that is affiliated with the university’s Institute for Nonprofits.

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