Daily Archives

October 17, 2019
  • The Importance of the Sustainable Endowment

    Nonprofit organizations and foundations have played a pivotal role in American culture for nearly a century. As a third sector next to corporations and government, they provide many types of programs and services to support the public that the other two sectors do not or cannot provide.

    The National Center for Charitable Statistics (NCCS) estimates that there are more than 1.5 million nonprofit organizations registered in the United States. These include public charities, private foundations, and other types of organizations. Nonprofits and foundations are also found throughout the world, but our concern in this book is solely those operating in the US under specific American tax laws and financial regulations.

    Nonprofits participate in a wide range of fields, including health, educa- tion, literacy, poverty reduction, social justice, religion, disaster relief, support for the arts, and more. They have been responsible for significant advances in the health field, such as eliminating hookworm and yellow fever in many countries, disseminating polio vaccines to the far reaches of the world, and virtually ridding humanity of smallpox. They have played a strong role in educating people about and treating HIV/AIDS.

    Nonprofits help fund theatrical and artistic productions, museums, cultural attractions for the public, and student scholarships for higher education. There is no doubt that nonprofits and foundations are a vital element in society that must continue contributing wherever they are needed.

    The Sustainable Endowment is my contribution to helping nonprofits and foundations learn how to be effective, well-managed, and sustainable. It is intended for executives and board members involved in the management of nonprofits, public charities, or private foundations operating in the United States. For our purposes, I do not make a distinction between these terms; all are organizations following the same basic ground rules when it comes to adhering to regulations to maintain Section 501(c)(3) tax-exempt status.

    For clarity, let’s note that “nonprofit” is an overarching term for many types of non-governmental corporations or organizations that do not seek to make a profit from their activities and are exempt from federal income taxes under IRS Section 501(c)(3). Instead, they use their financial resources to benefit a mission of some kind.

    There are roughly 29 sub-classes of nonprofits. One of these is a public charity, which collects donations from the general public to support a public cause, such as safety, disaster relief, assistance to the poor anywhere in the world, animal rights, and so on. A private foundation, often funded by a single individual or business, is equally dedi- cated to a cause or mission. Private foundations may donate to charities or may hand out monetary grants to individuals who seek to accomplish a goal on behalf of the foundation. Churches, religious organizations, educational institutions, and several other types of organizations may also be tax-exempt nonprofits.

    In my book, I will use the terms nonprofit and foundation interchangeably without distinction, as my goal is to help all types of nonprofit organizations that desire to improve their executive management, especially regard- ing their financial health. I will discuss the principles central to becoming a well-run nonprofit that understands how to manage its finances. Whether the nonprofit raises funds from public donors or is a foundation funded by a single source, the management of its investments plays an important role in its year-to-year success as well as its long-term sustainability.

    ORGANIZATION OF THE PRINCIPLES

    Discussing the financial management of a nonprofit encompasses many issues beyond the basics of investing. That is why this book is organized around 10 principles, beginning with three chapters covering the critical basics of foundation management.

    Following those three principles, the remaining seven will explain the specifics of how to go about the financial management of your endowment, especially in regard to investing the principal to maximize returns while minimizing risks. I do not delve into issues regarding a nonprofit’s fundraising efforts or operating budgets — those are your decisions.

    My goal is strictly to educate foundation leaders and investment committee members on the best practices for investing an endowment to maintain stability or to grow it over time with the least amount of risk. Executives at nonprofits and foundations, especially those on investment committees, come from a wide range of backgrounds. You may or may not be familiar with the investment concepts and principles that I present in my book, so please excuse the caution I have taken to ensure that I thoroughly explain basic terminology and the fundamentals of investing. I want to be sure all readers are comfortable with its contents.


    The Sustainable Endowment was written for executives and board members of small- to mid-size U.S.-based nonprofits, charities, or foundations. Running a nonprofit requires specialized knowledge and skills, especially regarding foundation management and investing your endowment so it remains sustainable for years to come.

    This book walks you through the basics and best practices of what you need to know to be successful.

    Order your copy today on Amazon

  • Environmental, Social & Governance (ESG) Awareness

    ESG Investing Adds Value on Many Levels

    In recent years there has been an increased awareness regarding public companies and their ESG track record. In my own work, I have also been witness to this trend. I often hear CEOs and research partners weighing in on enhancing their corporate culture as it relates to issues of governance, society and sustainability. Moreover, there is a growing movement of “smart money” investing in companies that have a strong history of these pertinent issues and I see this as something that adds value for shareholders. Over the years, I have included ESG components in my company’s research process to avoid investing in companies that have flagrantly poor environmental, social and governance track records.

    Investing in companies that cultivate ESG best practices just makes good investing sense. In the “old days” one might argue that to invest with a social conscious might mitigate performance – but today that is just not so. There are an increasing number of large institutional investors who appreciate companies with high ESG marks and their hefty investment dollars can go a long way in supporting both higher stock prices and industry standards.

    For many, investing with a social conscious is a challenge since most mutual funds – especially the index funds – invest in a wide array of companies without regard or ability to be ESG sensitive. This invariably exposes investors to companies that may have egregious violations, which hurts these index shareholders in the long run.

    ESG investing means different things to different people. Searching for companies with certain characteristics that show the promise of accelerated growth – with a bias towards those with positive governance, environmental and social awareness, is how I look at it. However, you may feel that you would like your portfolio to be more sensitive to specific ESG constraints. Do what works for you.


    The Sustainable Endowment was written for executives and board members of small- to mid-size U.S.-based nonprofits, charities, or foundations. Running a nonprofit requires specialized knowledge and skills, especially regarding foundation management and investing your endowment so it remains sustainable for years to come.

    This book walks you through the basics and best practices of what you need to know to be successful.

    Order your copy today on Amazon