Planning for your Institution’s financial sustainability

The Dual Lens of sustainability

Sustainability can take many forms—ranging from environmental and social responsibility to long-term financial viability. For institutional entities—including charities, non-profits, religious organisations, cultural and educational institutions, sporting bodies, public agencies, and state-sponsored organisations—financial sustainability is essential to fulfilling their mission and ensuring long-term viability.

While each institution’s mission is unique, all share a common need: robust financial resources to support their goals. Sustainable investing (also known as responsible investing) enables institutions to align their investment strategies with their values and mission. This begins with reflection and education to build a shared understanding—one that embraces a commitment to a more equitable and sustainable society and seeks positive outcomes for both people and the planet.

Financial sustainability: A long-term imperative linking strategy and finance

Financial sustainability means that an institution can continue supporting its current activities indefinitely. Both sustainable investing and financial sustainability are forward-looking, aiming to secure long-term viability.

As defined by the United Nations Brundtland Commission in 1987, sustainability is “meeting the needs of the present without compromising the ability of future generations to meet their own needs.”  For trustees and stewards of institutional assets, the foremost responsibility is to ensure the financial strength and sustainability of their organisation for generations to come.

Developing a financial strategy that supports long-term sustainability takes time and begins with a deep understanding of the institution itself. A key tool in this process is the Investment Policy Statement (IPS).

The Investment Policy Statement (IPS)

An IPS is the cornerstone of an institution’s investment governance. It serves as the strategic blueprint for the investment committee and those responsible for managing the institution’s financial assets.

This document outlines fiduciary responsibilities, governance structures, investment objectives, and the strategies to achieve them. It enables trustees and financial stewards to demonstrate compliance with their duties and commitment to good governance.

Because every institution is unique, the IPS should be tailored to reflect the specific needs, goals, and risk tolerance of the entity. It should also be flexible enough to adapt to changing market conditions and organizational priorities.

In practice, many trustees find it helpful to develop the IPS in collaboration with their investment manager. This ensures the document is both realistic and actionable.

The level of detail in an IPS will vary depending on the institution’s complexity. For example, entities limited to holding cash deposits may require only a brief IPS. In contrast, more complex organisations with diverse investment needs will benefit from a comprehensive policy that aligns with their strategic objectives and capital plans.

Key components of an IPS

A well-structured IPS typically includes the following elements:

• Purpose and mission: Clearly articulate the institution’s goals and values
• Governance and decision-making responsibilities: Define who is responsible for investment decisions and oversight
• Investment objectives: Set return targets and time horizons
• Investment strategy and asset allocation: Outline how assets will be diversified and managed
• Responsible investment strategies: Incorporate ESG (Environmental, Social, and Governance) considerations
• Risk management framework: Identify and mitigate potential financial risks
• Liquidity and spending policies: Ensure sufficient liquidity to meet obligations
• Reporting and monitoring procedures: Establish protocols for performance review and accountability

There is no one-size-fits-all IPS. Each institution must craft a policy that reflects its unique mission, values, and risk appetite. Importantly, the IPS should be treated as a living document—reviewed annually to ensure it remains aligned with the institution’s evolving goals.

Governance and mission alignment

Strong governance is critical throughout the planning, implementation, and oversight of the IPS. Trustees, investment committee members, and financial stewards must be able to clearly articulate why they are investing and how their investment approach supports the institution’s mission.

By conducting thorough internal evaluations and incorporating the essential building blocks of an IPS, institutions can chart a path toward financial sustainability—ensuring the long-term viability of their mission and purpose.