THE ELEPHANT IN THE NONPROFIT CONFERENCE ROOM

Amid all the current third sector challenges, including how to fundraise in this climate, how to sustain programs, how to maintain the endowment, staff shortages, how to measure and demonstrate impact, how to advance diversity, how to grow the mission, and so on—amid all these concerns and more—I foresee a much bigger crisis coming down the pike.

That’s how nonprofit organizations’ money is invested. Why? Because scarcely any nonprofit invests in a way that’s aligned with its mission. Understandably, most organizations outsource investment management to a financial services pro.

The nonprofit financial officer or executive director then oversees that management. Yet we know from the Madoff horrors that such oversight can often be very lax indeed. Few organizations engage in day-to-day investment choices. More to the point, even fewer require its hired investment management firm to make choices based on the organization’s values or mission or programs.

So what? Well, that means, for instance, that a nonprofit dedicated to helping kids might be making the money for such terrific programs from companies that profit from child labor. Not a pretty picture, is it?

In the age of transparency and accountability for the third sector, this rarely mentioned and frequent disconnect—that’s the polite word, of course—is turning into the elephant in the nonprofit conference room.

We need to open the doors and let the air in. We need to leverage the billions of dollars of nonprofit investment power to effect change with our money not just our muscle in the field.

Next installment: “SRI” or socially responsible investments and ESG or environmental, social and governance investments and how they work for change.

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