Investment strategy is a crucial component of financial management for not-for-profit (NFP) and non-governmental organisations (NGOs) in Aotearoa, New Zealand. While these organisations operate differently from for-profit entities, they also need to make prudent decisions about how to manage and grow their financial resources. 

In the dynamic landscape of NFP and NGOs, effective investment strategies are crucial for achieving long-term sustainability and impact. While the primary goal of NFPs and NGOs is to serve their communities or causes, sound financial management is essential to support these missions. 

In this article, we will explore key areas of focus, common pain points, and growth areas for NFPs and NGOs in Aotearoa when it comes to investment strategy.

Key Areas of Focus
Generally speaking, there are a few key areas on which NFP or NGOs should focus. Elements such as priority would be subject to that organisation's needs and we encourage that this is used as food for thought, rather than a recipe to create your investment strategy.

Mission Alignment
The investment strategy of an NFP or NGO should align with its mission and values - the tīkanga and kawa of the organisation. This means investing in ways that further the organisation's goals while adhering to tīkanga. For example, an environmental NGO might choose to divest from fossil fuels to align its investments with its commitment to sustainability.

Living and breathing your organisation's values is critical to embedding these with your kaimahi (staff). There are a lot of activities you can do to enable this by visually representing those values with posters and other creative material as a visible reminder. 

Risk Management
Managing risks is paramount for NFPs and NGOs, as they often rely heavily on koha (donations), grants, and fundraising efforts. A well-rounded investment strategy should consider the organisation's risk tolerance, liquidity needs, and the impact of market volatility on its financial stability.

There are many tools you can use to understand your risk and conduct appropriate actions to mitigate or reduce the risk to your organisation through the means of services such as Assurance. As a partner of QE Delivery, The Massive Collective is capable of providing your organisation with real-time project/programme assurance.

Diversification of Investments
Diversifying investments helps mitigate risk and improve long-term returns. NFPs and NGOs should consider a mix of asset classes, such as equities, bonds, and alternative investments, based on their financial goals and risk appetite.

This will vary from organisation to organisation but we suggest first focusing on investments within your wheelhouse especially if you are looking for an active investment. For example, if your Organisation is a Tertiary Education Organisation (TEO) in areas such as horticulture or agriculture - then an ideal investment would be commercial farming which can be used for both Education/Training and asset investments.

For organisations looking for passive investment partnerships would be a good option which we explore later in this post.

Financial Sustainability
Achieving financial sustainability is crucial for the long-term viability of NFPs and NGOs. An effective investment strategy should support the organisation's operational needs while maintaining a focus on long-term growth and impact.

One key area in which The Massive Collective specialises is the commercialisation of Products or Services. This is subject to the organisation, but often we find these organisations have products, processes, intellectual property (IP) or services that could be used by others that can be packaged, taught and delivered by other organisations looking to expand or improve their services in other rohe (districts/regions).

Common Pain Points for Our Customers
We have consulted with many customers over the past few years in areas from Hauora (Health), Housing, Education and Employment. The following are key areas that we typically see with our customers are pain points for them.

1. Limited Resources
   Many NFPs and NGOs in New Zealand operate on tight budgets, which can limit their ability to invest in professional financial management services. This can make it challenging to develop and implement a comprehensive investment strategy.
2. Lack of Expertise
   Unlike for-profit organisations, NFPs and NGOs may not have access to the same level of expertise in business or financial management and investment strategy. This can make it difficult to navigate the complexities of the financial markets.
3. External Investments
   Investors may have different expectations when it comes to how NFPs and NGOs manage their finances. This can be especially problematic with organisations with a high reliance on government grants/funds.
   Balancing the need to meet investor's expectations with the organisation's own financial goals can be challenging.
4. Regulatory Compliance
   NFPs and NGOs in Aotearoa are subject to a range of regulatory requirements, especially in areas such as financial management and reporting. Ensuring compliance with these regulations can be time-consuming and resource-intensive.
5. Impact Measurement
   Demonstrating the impact of their investments is important for NFPs and NGOs. However, measuring impact can be challenging, especially for organisations working in complex social or environmental areas.

Key Growth Areas
With the pain points in mind, we have come up with key growth areas your organisation should focus on within your investment strategy.

• Impact Investing
  Impact investing is a growing trend in the investment world, which seeks to generate positive social or environmental impact alongside financial returns. NFPs and NGOs can explore impact investing as a way to align their investments with their mission.
• Collaboration and Partnerships
  Collaborating with other organisations and forming partnerships can help NFPs and NGOs pool resources and expertise to achieve common financial goals. This can also help spread the risk of investment.
• Technology Adoption
  Embracing technology can help NFPs and NGOs improve their organisation practices. This includes using software for investment analysis, reporting, data collection (aggregation) and management.
• Capacity Building
  Investing in the skills of kaimahi (staff) and board members can help NFPs and NGOs make more informed investment decisions. This may involve providing training or hiring external consultants.
  We suggest exploring areas such as Governance or strategic development as a starting point for your journey.
• Sustainable Funding Models
  Developing sustainable funding models can help NFPs and NGOs reduce their reliance on unpredictable funding sources. This may involve diversifying income streams or exploring new fundraising strategies. This is where the commercialisation of products/services can be beneficial for your organisation. 

In conclusion, developing a successful investment strategy is crucial for the long-term financial health and sustainability of not-for-profit and non-governmental organisations in Aotearoa. By focusing on mission alignment, risk management, diversification, and Sustainability, your organisation can maximize your impact while ensuring financial stability. Addressing common pain points will help overcome challenges and achieve your goals. Exploring key growth areas such as impact investing, collaboration, technology adoption, capacity building, and sustainable funding models can further enhance the effectiveness of their investment strategies.

If you are exploring your options and need someone to tautoko you on your journey, please reach out and kōrero with us.