In the world of philanthropy, a great deal of time and energy is spent ensuring that programming and grant-making efforts align with the organization’s mission. But have you ever considered whether your investment portfolio does the same? While your foundation may be actively funding programs for social justice, environmental protection, or community development, your investments might be working against those very same goals. This article explores why it’s essential to audit your investment portfolio for alignment with your mission and offers practical steps to ensure your financial and social goals work in harmony.

Why Audit Your Investment Portfolio?

It’s easy to assume that as long as your programs and grants are positively impacting communities, your mission is secure. But what happens when your investment dollars are being funneled into industries or companies that contradict the very changes you’re trying to drive? Many organizations inadvertently fund sectors like fossil fuels, weapons manufacturing, or companies with questionable labor practices while also granting money to support climate justice or workers’ rights.

For instance, a recent review revealed that one foundation’s portfolio had a negative social impact three times higher than the positive impact generated by its grant-making. Without realizing it, the organization was effectively erasing the benefits of its impactful grant work by investing in entities misaligned with its values. This is why auditing your investment portfolio is crucial. You might be working tirelessly to fund the future, but your investments could be keeping you tethered to the past.

Health Check of Your Portfolio

One of the most straightforward ways to begin realigning your investments with your mission is through a Portfolio Health Check. This involves a two-step process to ensure that your capital is working alongside your programming, not against it.

Step 1: Mission Identification

Before diving into your portfolio, it’s essential to get clear on the values, specific pillars, and mission-aligned goals of your organization. Extract these from your programs and initiatives—what are you working toward? For some, this could mean prioritizing environmental sustainability or racial justice. For others, it might involve funding initiatives that focus on women’s rights or education.

Step 2: Portfolio Screening

Once your mission-aligned values are identified, the next step is to overlay these values onto your investment portfolio. This helps to assess how much of your portfolio aligns with your mission and, just as importantly, how much of it contradicts your values.

In a recent portfolio health check, we found that 29.74% of one organization’s portfolio was flagged for value misalignment. These investments were tied to industries such as fossil fuels, predatory lending, and companies known for poor human rights practices. This revelation allowed the organization to take immediate action—replacing non-aligned investments with those that matched their ethical standards.

Remedy: If your portfolio shows similar misalignments, consider divesting from these sectors and reinvesting in industries that support your mission. This step ensures that your financial capital is advancing, not hindering, your goals.

Grant-Making Vs. Investment Analysis

For foundations that make grants, auditing the investment portfolio requires a more detailed approach. Many organizations focus heavily on their grant-making strategies but fail to consider whether the financial engines behind those grants—namely, their investments—are consistent with the goals they aim to fund.

Step 1: Analyze Past Grant-Making Activities

Start by reviewing your grants over the past year, three years, or five years. What are the key pillars or focus areas you have supported? Take note of the dollar amounts allocated to these causes and the outcomes they aim to achieve. This gives you a clear picture of what your foundation has prioritized and how much financial muscle you’ve applied to these initiatives.

Step 2: Portfolio Alignment Check

Next, overlay your investment portfolio against the focus areas of your grant-making efforts. Are your investments aligned with the causes you are funding? For example, if your foundation is heavily invested in supporting environmental sustainability, but your portfolio contains significant investments in fossil fuels, there’s a clear misalignment.

In one case, a foundation was found to be investing heavily in companies involved in private prison labor while simultaneously funding decarceration initiatives that advocated for prison reform and resources for returning citizens. This undermined the foundation’s public stance and risked diluting the impact of its grants.

Adjusting the investment strategy to reflect the foundation’s grant-making goals is critical. By ensuring that the money used to fuel grant-making is sourced from investments that align with your mission, you can amplify the impact of both your investments and your grants.

How to Get Started: Conducting an Alignment Audit

Now that you understand the importance of aligning your investment portfolio with your mission, it’s time to take action. Here’s how you can begin:

1. Health Check Process: Start by conducting a health check on your portfolio. Work with your finance team or an investment advisor to screen for investments that conflict with your organization’s values. This could involve applying ESG screens, using a third-party service, or working directly with your investment manager to assess the companies in your portfolio, not just your investment managers.
2. Grant-Making Focus: For foundations that make grants, involve both your program officers and finance team in the conversation. By bringing together the people who control the grants and those who manage the investments, you ensure that the left hand knows what the right hand is doing. The result is a more cohesive, impactful strategy where all the foundation’s resources—both financial and programmatic—are working toward the same goals.

Putting Your Mission in Motion

If you’re ready to ensure that your investments are working in harmony with your mission but aren’t sure where to start, the Zenith Wealth Partners team is here to help. We offer complimentary health check audits for organizations looking to assess the alignment of their portfolios with their values. Our team is passionate about helping organizations align their capital with both personal and organizational values. We believe in educating boards and foundations about the potential unintended damage that may be taking place within their portfolios. 

By conducting a thorough analysis, we can help you make informed decisions and guide you through the necessary changes to ensure your financial resources are contributing to the positive impact you want to create.

Reach out to us today to schedule your audit and take the first step toward fully aligning your portfolio with your mission.

– Andrew Tudor, CAP, CFP®

All written content is for information purposes only. Opinions expressed herein are solely those of Zenith, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.