Can you tell us more about investment compliance?
Nonprofits have to disclose a lot about their investments and their financial statements. There are pages and pages of footnotes related to our financial-statement disclosure, so we have to level our assets and we have to disclose information about our alternative investments. And many of us have a complex series of investments. We have endowment investments, we have pension investments, we have what are called charitable gift annuity investments, and each has separate disclosure requirements.
What does NRDC invest in?
We invest in a mix of different vehicles, and we really try to match our strategy to the time horizon of the investment. We also try to assess the level of risk of an individual investment pool, so the strategy will differ depending on whether the funds are in an endowment which is a perpetual trust or whether they’re short-term operating funds. We invest under the guidance of our trustees and our board of trustees, and they will help us determine what that mix is given the spending horizon and the purpose of our investments. It is usually a classic asset allocation of stocks, bonds, alternative investments, real estate and cash.
Do you avoid investing in funds that conflict with your mission, like fossil fuels?
NRDC has long maintained a policy of not having any direct investment in fossil fuels or extractive industries. It’s an area of great focus in our industry right now and great importance to NRDC. We really believe that walking the walk is important for any organization, particularly for an advocacy organization.
Investing in a mutual fund wouldn’t count as directly investing, right? And the fund can choose to invest in fossil fuels and you can’t really control that?
That’s correct. If you’re invested in index funds, which are a great strategy for nonprofits, because they’re low cost and also they provide a broad basket of market exposures, you will have that broad basket unless you tailor the index fund.
Is that something people are pushing you to do, get out of those kinds of index funds?
It’s certainly an area of great interest for us.
That gets to the heart of the difficulty of being a CFO at a nonprofit, because you’re serving two masters.
Right. There’s a law called UPMIFA, the Uniform Prudent Management of Institutional Funds Act, and it requires us to consider a range of issues when we’re looking at investments. We have to consider return and the purpose of an organization. We have to consider the economics and the economic circumstance during a given time period. We have to consider mission too, in terms of what’s appropriate for an organization.
As CFO does that fall squarely on your shoulders?
Absolutely. At NRDC, as with many organizations, it is the board of trustees that has the technical responsibility for making investment decisions. But my role is very much related to advisory, preparation and direction, to make sure that we’re working on the most important hot topics.