In Brief

Cause investing—the directing of one’s investments to companies that directly promote or embody through their conduct a particular social good—is becoming more and more prominent, especially among not-for-profits. But as organizations implement their cause investing programs, they need to be sure the relevant decision makers are all on the same page. The author discusses the different types of cause investing, providing examples of how different organizations define and implement them, often in an overlapping manner.

CPAs are often exposed to investing and investments through their clients—auditing the disclosure schedules they provide, getting comfortable with valuations, and dealing with matters concerning ownership, for example. There has been a tremendous increase in institutional investors pursuing their mission through their investments. What makes this a challenge is that there are many ways of doing so: by divestment (screening out certain “unacceptable” investments); positive screens (actively seeking investments that support an initiative or mission goal); or looking at the structure of the entities in the investing chain (advisor, consultant, manager, administrator) and applying a diversity, equity, and inclusion (DEI) framework to staffing.

The investing landscape is changing, and there is a role for CPAs to be helpful. As management considers its approach to cause investing, it becomes apparent that the language and metrics used are not universal, and may not even be consistent within an organization. Cause investing can be of interest to any business, but may especially be of interest to not-for-profit entities with greater investing activities, such as foundations (private, operating, community) and college endowments.

Many entities will likely embrace cause investing, but what each means by that term will be different, as seen with the move to outsourced chief investment officers (OCIO). Each organization will likely define it in different ways and implement it in myriad frameworks, but a central taxonomy will allow for better discussion through the use of a commonly accepted nomenclature. This nomenclature does not have to be universally accepted—as long as the decision makers within an organization agree on what the terms mean (to them and their organization) and the investing implications for each, they can have meaningful conversations. The purpose of this article is to offer a common ground to facilitate such discussion.

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