Aligning Investment Strategies with Nonprofit Values

As society and the economy continue to evolve, nonprofits are under growing pressure to demonstrate their values, not only through their missions, but also in how they manage their resources. For mission-driven organizations, aligning investment strategies with core values isn’t just a nice-to-have, it’s a strategic imperative.  

By integrating purpose into financial decision-making, nonprofits can reinforce their credibility, deepen stakeholder trust, and ensure their capital is working in service of their cause. 

Your nonprofit may see that investment portfolios can help advance your values and mission. For instance, this can include divesting from fossil fuels, supporting community development, or focusing on equity-focused funds. This alignment requires intention, clarity, and a willingness to rethink traditional financial assumptions. 

In this article, we explore how nonprofits can close the gap between purpose and portfolio — translating mission into meaningful investment decisions. You’ll find practical guidance on defining values-based investing, engaging stakeholders, and building sustainable strategies that reflect both financial stewardship and social impact. 

Interpreting values-based investing 

Values-based investing, also called mission-aligned investing, means investing a nonprofit’s assets in a way that supports both its mission and financial objectives. 

This type of investing can take many forms, including: 

• ESG (Environmental, Social, and Governance) investing: ESG evaluates corporate behavior, when screening potential investments based on sustainability and ethical practices, and its impact on investment performance. 

• SRI (Socially Responsible Investing) strategies: Avoids industries or companies that go against an organization’s values. It includes those that match its values. 

• Impact investing: Actively seeks investments that generate measurable social or environmental benefits alongside financial returns where capital goes toward projects, companies, or funds. 

For nonprofits, the stakes are high. Investments that contradict the organization’s values can erode trust and credibility. On the other hand, aligning responsible investments with values can increase impact by inspiring more engagement from donors, staff, and the communities served. 

Building an aligned investment policy 

Creating an investment policy that reflects a nonprofit’s mission is a foundational step toward aligning financial decisions with organizational values. A well-crafted Investment Policy Statement (IPS) serves as both a roadmap and a guardrail that guides investment decisions while ensuring accountability to stakeholders. 

1.      Define the mission in investment terms 

Start by translating your nonprofit’s mission into clear investment principles. For example, an environmental nonprofit might focus on funds that do not include fossil fuels. A health-focused group may avoid companies that deal with tobacco or predatory lending. These principles should be specific enough to guide decisions but flexible enough to adapt over time. 

2.      Establish screening criteria 

Use positive screening to invest in companies or sectors that match your mission. Use negative screening to exclude those that go against your values. Common criteria include environmental impact, labor practices, diversity and inclusion, and corporate governance. 

3.      Set risk and return expectations 

Mission alignment doesn’t mean sacrificing financial performance. Define your organization’s risk tolerance and return objectives in the context of your long-term goals. Consider how liquidity needs, time horizons, and spending policies influence your investment strategy. 

4.      Incorporate ESG and impact metrics 

Include language in your IPS that encourages or requires the use of ESG data or impact measurement resources. This ensures that investment managers are evaluating not just financial returns, but also social and environmental outcomes. 

5.      Define roles and responsibilities 

Clarify who is responsible for implementing and monitoring the policy. Typically, it will be the board, investment committee, and external advisors.  

Outline how often there will be reviews and updates to the policy. Also, explain how performance will be reported. This includes both financial and mission-related results. 

6.      Document and communicate 

Once finalized, the IPS should be documented, approved by the board, and shared with relevant stakeholders. Transparency builds trust and reinforces the nonprofit’s commitment to aligning its financial practices with its mission. 

Measuring impact and performance 

Aligning investments with your nonprofit’s mission is only meaningful if the impact is measurable and easy to communicate. Tracking financial returns and mission-related outcomes ensures accountability. It builds trust with stakeholders and helps improve strategy over time. 

• Define what success looks like to help shape the metrics you track. 

• Evaluate your portfolio’s performance with traditional financial indicators like return on investment and volatility. Also, assess mission-aligned criteria such as ESG scores, carbon footprint data, or diversity benchmarks. 

• Set up regular reviews, either quarterly or annually. This lets your board or investment committee check progress, find gaps, and change strategy if needed. 

• Communicate the results transparently. Sharing updates through annual reports, newsletters, or donor briefings shows your commitment to mission-aligned investing. This can inspire your community to engage more deeply. 

Overcoming challenges 

Aligning investments with your nonprofit’s mission has clear benefits. However, moving forward can be difficult and complicated. 

A common challenge is that boards or stakeholders may hesitate. Some investors express concerns that values-based investing may impact financial returns. You can address these concerns by sharing data and case studies that show how well ESG and impact investments perform.  

Additionally, frame the alignment as a form of risk management. Starting with a pilot or partial allocation can also help build confidence. 

Another barrier is the lack of internal expertise. Many nonprofits lack in-house investment experts. However, they can solve this by hiring advisors. These advisors focus on mission-aligned portfolios and provide training for board members. 

Nonprofits can also struggle to balance short-term funding needs with long-term mission goals. Setting clear liquidity targets and adopting a tiered investment approach can help maintain flexibility while pursuing alignment. 

Moving forward 

Every decision is an opportunity to live the mission, including how financial assets are managed. Aligning investment strategies with organizational values is not just about ethics. Values-based investing is a smart choice that helps build credibility, strengthens stakeholder trust, and increases long-term impact. 

The journey to mission-aligned investing may include new talks, new tools, and some trade-offs. However, it helps your nonprofit lead with integrity. And can help ensure that its capital works as hard as its programs to create positive change. 

Your organization might be new to this journey or looking to enhance an existing strategy. Make a commitment to invest with intention. 

Choosing the right partner 

At Mercer Advisors, our Endowments & Foundations team knows how to balance financial success and social impact. We can help turn your values into real investment strategies. We would be glad to show you how we use ESG or impact criteria. We can also explain how we measure non-financial outcomes and support shareholder advocacy. 

As part of our partnership, we will provide regular, clear reporting on both returns and mission alignment. You’ll receive regular reviews to ensure your strategy evolves with your mission and the market. 

Mercer Advisors can support your nonprofit’s mission through fiduciary advice and partnership. We have been serving clients for 40 years and match the size of some of the largest foundations and endowments in the U.S. This lets us provide our clients with more investing options than smaller advisory firms usually offer.  

When you’re ready to move forward with aligning investment strategies with your nonprofit’s values, contact us.