Not-for-profits and charities play a vital role in New Zealand’s financial ecosystem. The charitable sector helps to address various social, environmental, and community needs by supporting people and causes that can completely change the course of people’s lives for the better.
For organisations in the not-for-profit sector, their key income stream is often through charitable donations. Unlike how listed companies are assessed for their financial performance, the key success measure for charities is less about money, and more about their social outcomes.
With no shortage of charities in New Zealand, donors are increasingly looking for more information to help them make informed decisions about where and how they support the sector in ways that align with their values and what social impact matters most to them.
Jarden has partnered with ImpactLab to help people understand more about the concept of Social Return on Investment (SROI) in the New Zealand charity sector. SROI is a quantified way to estimate a programme’s impact on a person or family’s well-being over their lifetime, relative to the investment.
Through a report, which is set to be released this month, ImpactLab have analysed more than 100 programmes across New Zealand's charity sector to identify and understand our unique social investment approaches, using the ImpactLab innovative GoodMeasure standardised measurement model.
This report is an evidence-based introductory guide, and it marks a significant milestone for the sector, setting a precedent for the industry using internationally recognised SROI.
Three distinct investment approaches have been identified, providing a framework for donors to help align their personal values and interests with the causes they are passionate about. By offering an understanding of the social impact of various charities and organisations, investors can make informed choices that resonate with their individual goals.
Broad impact. These programmes have a low cost per person and are large-scale. This means they deliver modest social value to many people.
Balanced impact. These are moderate-cost programmes of varying scale that deliver varied social value, depending on the comprehensiveness of support and complexity of the population served. These programmes are scalable and are typically targeted to a more specific population than broad impact programmes.
Deep impact. Programmes that are deep impact serve people with very complex lives. For this reason, these are high-cost programmes that deliver intensive support to a small group of people with high complexity to achieve significant social change.
This information is useful for those in the charity sector and donors alike, as it illustrates how Social Return on Investment can be used as a tool to inform the decision-making across Aotearoa New Zealand's charitable sector.
No one investment type is better than the other, and there is no one ‘best programme’ to invest in. The three categories provide a framework for the sector, so charities and donors can have focused conversations about where and how to invest for different levels of community impact.
Alongside relying on donations, managing assets and investments is also a key income stream to fund a charity's mission effectively.
Not-for-profits often entrust hard-working volunteer trustees with the careful management and investment planning required to manage their financial assets.
The trustees of charities and not-for-profits play an important role in striking a delicate balance between protecting the assets from risk, while also seeking good returns.
They will often achieve this with a diversified investment portfolio that can protect the organisation's assets from the inherent uncertainties of financial markets. Diversification is a common financial management strategy that involves spreading investments across different asset classes, such as cash, bonds, shares, property, and alternative investments. This approach aims to reduce the impact of poor performance in any single investment.
The SROI report has been developed to help donors make donation choices based on their personal values and interests, so they can support the causes they are passionate about. Likewise, trustees are entrusted to make investment decisions that are aligned with the charity’s overall goals and mission.
Whether developing an investment strategy on behalf of a charity, investing your own assets or looking to donate to a charity, it can be hard to know where to start and how to make best use of those assets. Financial experts, such as investment advisers or asset managers, can offer valuable insights and guidance to make informed investment decisions.
The ImpactLab and Jarden report, titled Charitable Sector Insights: An introduction to Social Return on Investment is available here.
Chris Wilson is CEO, Jarden Wealth. The information and commentary in this article are provided for general information purposes only. It reflects views and research available at the time of publication, using external sources, systems and other data and information we believe to be accurate, complete and reliable at the time of preparation. We make no representation or warranty as to the accuracy, correctness and completeness of that information, and will not be liable or responsible for any error or omission. It is not to be relied upon as a basis for making any investment decision. Please seek specific investment advice before making any investment decision or taking any action. Jarden Wealth Limited is an NZX Advisory Firm. A financial advice provider disclosure statement is available free of charge here.
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