Now that you have all of the components related to investing and spending charitable dollars, let’s tie them together and show how they work to support a hypothetical organization’s mission. Also, at the bottom of this page, we have listed all resources referred to throughout this guide for ease of future reference.

Hypothetical:  Starting an Endowment and Using Impact Investing Strategies

Doing Good in our Community (“DGC”), a charitable organization located in a large urban area in Pennsylvania, was founded 20 years ago and focuses on projects to improve health, education, social, and other services in distressed areas of the community. To improve the health and safety of community residents, DGC-funded projects often include crime prevention, substance abuse prevention, and exploration of high-impact environmental solutions such as new alternative and renewable energy sources.

Starting an Endowment

Since its founding, DGC has generally engaged in an annual fundraising drive to meet its operating budget. A few years ago, the Board decided to undertake a fundraising campaign to create an endowment. The Board adopted a resolution and the development office began working on a campaign. See Sample Board Resolution for Soliciting Funds for a Permanently Restricted Endowment.

Adopting an Investment Policy Statement

As the endowment fundraising campaign ramped up, the Board began work on an investment policy statement. Over a number of meetings, the Board engaged in discussions about the organization’s values, their fiduciary duties, and how the future endowment should be invested and managed for the long-term. They drafted an IPS for the organization identifying their investment strategies and objectives and adopted it at their next Board meeting. See Investment Policy Statement Board Discussion Guide and Sample Board Resolution Adopting an Investment Policy Statement.

Engaging an Investment Advisor

The investment committee of the DGC Board then contacted Board members of peer organizations in their community for recommendations of investment advisors and began a process for engaging an investment advisor to manage the future endowment. See Toolkit:  Sourcing and Selecting an Investment Advisor. After interviewing several candidates, the Board selected an investment advisor whose experience, investment philosophy, and service offerings best matched DGC’s needs and impact goals.

Organization leaders worked with the investment advisor to open a new account. Due to the success of the development office’s fundraising efforts, DGC raised enough money to create a permanently restricted endowment and the funds were placed in the new account for management by the investment advisor according to the IPS.

Adopting a Socially Responsible Investing Strategy

Last year, at an annual retreat, the Board reviewed DGC’s mission and the impact they were having and discussed whether they could do more. Following the retreat, the investment committee of the Board met with their investment advisor and discussed incorporating a socially responsible investing strategy for the endowment. The investment advisor used environmental, social, and governance tools to screen possible investments and made suggestions for rebalancing the portfolio. The Board reviewed the ESG metrics, approved the SRI plan, and instructed the investment advisor to divest the endowment from companies with ties to weapons or firearms, tobacco, and fossil fuels and to add funds and investments in companies that align with DGC’s values.

Supporting a Community Bank

Earlier this year, the Board approved moving money currently held in their investment advisor’s money-market fund that is earmarked for expenditures over the next 18 months to a Community Development Financial Institution to support underserved areas of the community. And now, the DGC Board is in discussions with a grantee to guarantee a third-party loan, which will allow the grantee to expand its operations into a distressed neighborhood. See Sample Loan Guarantee Policy.

Advocating for Impact Investing

Over a few years, DGC undertook a variety of activities to make the most of its charitable dollars and has seen its impact in the community increase. The Board asked DGC’s leaders to share the activities on DGC’s Form 990/990-PF, and on DGC’s website, where they also included a shortened copy of their IPS and mission statement. DGC leaders are also describing their activities to their network and learning more from their peer organizations about other impact investing activities. See Untours Foundation’s resources Paradigm Shifters and 990 & 990-PF Toolkit for more ideas on advocating for impact investing.

With this strong foundation in place, the DGC Board is poised to take advantage of more impact investing opportunities in the future including making and guaranteeing loans for grantee organizations and adding program related investments to their work.

Using These Tools for Your Organization

The above example weaves together the concepts that have been previously discussed about how to make the most of your organization’s charitable dollars. Every organization is different and the example is intended to illustrate that your investment approach can be tailored to best carry out your organization’s mission. It does not matter where you start – every action will have its own impact – the important thing is to think strategically about your organization’s values and the impact you want to have and then design your investment strategy to support that vision.

ALL RESOURCES REFERENCED IN MANAGING AND MAKING THE MOST OF CHARITABLE DOLLARS

Legal Authority

• Summary of Pennsylvania’s Laws for the Investment and Spending of Charitable Funds
• Summary of the Private Foundation Rules Regarding Investment and Spending
• Summary of the Primary Fiduciary Duties of Directors of Pennsylvania Nonprofit Corporations
• Summary of the Primary Duties of Trustees of Pennsylvania Charitable Trusts
• Treasury Notice 2015-62

Agreements and Tools

• Sample Donor-Designated Endowment Agreement
• Sample Loan Agreement
• Paradigm Shifters
• 990 & 990-PF Toolkit

Policies

• Sample Gift Acceptance Policy
• Sample Loan Guarantee Policy
• Investment Policy Statement Board Discussion Guide

Board Management Tools

• Sample Board Resolution for Establishing a Board-Designated Endowment
• Sample Board Resolution for Soliciting Funds for a Permanently Restricted Endowment Fund
• Sample Board Resolution Adopting an Investment Policy Statement
• Sample Board Resolution Adopting a Total Return Investment Strategy and Making an Income Election
• Impact Investing Board Discussion Guide
• Toolkit for Sourcing and Selecting an Investment Advisor