Constructive trends for nonprofits include strengthening support for social and environmental issues, supply chain normalization and the hidden upside to high interest rates. This piece explores nine top-of-mind investing themes for nonprofits.
1. Impact Investing
The What: Impact investing is increasing in popularity among nonprofits. We define impact investing as investment in projects, companies, funds, or organizations with the goal of generating and measuring mission-driven social, environmental, or economic change in concert with an appropriate level of investment return. While impact investing is already popular with community foundations, it is becoming more prevalent with museums, education institutions, and human service organizations.
The So What: Consider the role of impact investing for your organization’s broader investment strategy to help move the performance conversation from solely returns-focused to one that captures actual impact.
2. The Inflation Reduction Act
The What: With the passing of the Inflation Reduction Act of 2022, nonprofits can benefit from access to tax savings designed to reduce the cost of installing energy efficient systems. The Act also introduced significant spending in support of the environment, conservation programs, and clean energy.
The So What: Review the Act’s potential energy cost-savings benefits for your organization.
3. Supply Chain Normalization
The What: Nonprofits are often first responders in times of crisis, providing critical resources and care to vulnerable citizens. Fueled by the COVID-19 pandemic and Russia-Ukraine war, supply chain disruptions created serious challenges as necessities, such as baby formula were out of stock for those who needed it most. With the easing of pandemic-era restrictions in China, supply chains have begun to normalize.
The So What: Review your providers of goods and services to learn if you can find a reduction in price and keep your organization operating smoothly.
4. Diversification Still Matters
The What: A diversified investment portfolio is always important, but especially during a market downturn. With the continuation of elevated market volatility and expectation for additional interest rate movement, there is return potential within multiple asset classes.
The So What: Meet with your investment advisor to review your organization’s Investment Policy Statement for continued alignment of goals and risk tolerance.
5. Collaboration Could Ease Recession Uncertainty
The What: With the possibility of a global recession on the horizon, nonprofits are bracing for the next wave of challenging economic conditions. On many fronts, nonprofits are still addressing the fallout from the recent crises.
The So What: As demand for services remains high, staffing remains a challenge, and funding is unpredictable, organizations may find relief in collaborating with others to provide services in a more efficient and holistic manner
6. Economic Uncertainty Impacts Giving
The What: Donor engagement remains high, as consumer balance sheets closed last year with resilience. Keep your story sharp and communicate consistently with new and existing donors. If the recession does play out, major donors will be an important source of financial support. As small donor and corporate gifts are more likely to be impacted by the economic slowdowns, larger donors are more likely to provide more support during challenging times.
The So What: Don’t be afraid to ask for what you need – the full costs of your programs; and unrestricted, multi-year gifts. These allow you to bolster your infrastructure, attract and retain qualified staff, and maintain a reserve fund. Show your donors how these types of gifts allow you to remain resilient through economic uncertainty.
7. Taking Care of Your Employees
The What: Employee retention is a challenge for many nonprofits as inflation, flexibility and the favorable job market can make it difficult to keep staff. While organizations may not have the flexibility to meaningfully increase wages, there are many other ways to impact employee satisfaction.
The So What: Consider perks such as additional PTO, enhanced benefits, and flexible schedules. Sharing resources or outsourcing specific responsibilities such as accounting, or investment roles can save costs and lighten the burden on full-time employees. Training and development is an attractive incentive for workers and benefits your organization.
8. Interest Rate Upside
The What: Interest rate hikes have slowed the pace of new mortgages, loan growth and overall borrowing. However, higher interest rates often also translate to higher savings account and money market investment rates.
The So What: Evaluate your organization’s savings and liquidity profile — from operating cash reserves to “rainy day” funds — to take advantage of this high rate environment.
9. Cyber Security Increases in Importance
The What: Nonprofits are vulnerable to cyber-attacks due to fewer resources available to employ IT staff, invest in security software and train staff on cyber security.
The So What: Prioritize cyber security by evaluating potential risks and creating a policy to address a cyber-attack should one occur. Take advantage of the free and discounted resources offered to nonprofits by organizations such as NTEN and TechSoup. And ask your insurance provider if you are covered by losses generated from a breach.
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