Nonprofit organizations consistently ignored the benefits of alternative investments, environmental, social, and governance investing and diversity, equity, and inclusion initiatives, according to CAPTRUST’s 2022 Endowment and Foundations Survey.
Of 169 nonprofit organizations surveyed by CAPTRUST, 37% did not allocate resources to alternative investments, with 10% of those reporting that they did not see a benefit in doing.
“With a range of strategies available and numerous potential rationales for investments, many nonprofits may benefit from exploring this asset class,” CAPTRUST Director James Stenstrom wrote in the report.
However, alternative assets ranked first among asset allocations organizations most expect to increase, with 82% of organizations expecting to increase their allocation. Only 18% of organizations expected their allocation to alternative assets to decrease. Alternative investments presented the most lopsided expectation compared to the other asset allocations with less interest, such as cash, domestic equity, fixed income and international equity.
ESG As Detractor
Organizations that adopted ESG versus those that did not have significantly contrasting attitudes towards mission-aligned investments, according to CAPTRUST. Nonprofits that had not adopted ESG were 3.4 times more likely to think the initiative would detract from their performance.
The most common obstacle for organization’s adopting ESG was potential performance impact, as reported by 32% of respondents. This was followed by 26% of organizations citing the inability to track specific impacts as a barrier. Overall, the number of nonprofits allocating to ESG decreased in 2022.
Both groups, however, expected their organization to adopt ESG in the future, with 28% expecting an increase and only 6% expecting a decrease.
Respondents identified anti-pornography as the top personal priority guiding their ESG, impact, and mission-aligned investment. This was followed by pro-racial minority equity, pro-religion, Pro-human/worker’s right
DEI Not a Focus
CAPTRUST also found foundations and endowments were faltering on their DEI efforts. Although 82% said DEI increases effectiveness, the initiative was ranked as the lowest concern by a wide margin. Eighty percent of respondents felt neutral, low concern or extremely low concern about DEI.
Furthermore, 96% of nonprofits said they prioritized DEI when recruiting for their boards, but only 16% had any diverse board members. Overall, diverse talent represented only 6% of all boards.
“Our largest survey effort to date, CAPTRUST’s 2022 Endowment & Foundation Survey expands on techniques pioneered in previous years’ edition,” said James Stenstrom, director of CAPTRUST, in the letter from the editor. “We have worked to identify not just what nonprofits are doing, but why. By understanding peer thought processes, organizations can use the collective wisdom of the sector to inform their own decision-making.”