April 26, 2023

Impact Investing through NPT’s Thematic Portfolios

Author Will Mucci, Guest Blogger

In October 2019, NPT partnered with CapShift to help donors generate a greater impact with their donor-advised funds. CapShift’s impact investing platform and suite of solutions empower financial and philanthropic institutions and their clients to invest in their vision for a better tomorrow, so we were well equipped to work with NPT toward this goal. Together, we launched four public impact investing portfolios with the themes of environmental stewardship, gender lens, equity & inclusion, and broad social impact. These portfolios empower donors to align their donor-advised fund investments with their charitable goals using a single investment solution. The portfolios are a powerful impact investing tool and we’re excited to share a behind-the-scenes look at our process constructing the portfolios and an update on their results.

How are the Portfolios Constructed?

To design the Thematic Impact Portfolios with NPT, our first order of business was to determine the impact goal for each of the four portfolios. Impact goals serve to guide the portfolio’s overall strategy. In essence, impact goals tell us what we are trying to influence with our investment approach. The collaboration between NPT and CapShift resulted in the following impact goals for each portfolio:

PortfolioImpact Goal
Environmental StewardshipManage climate change risks and protect and conserve natural resources
Gender LensSupport the advancement of women in the workplace and beyond
Equity & InclusionNarrow inequalities in society by creating economic opportunity that advances equity and inclusion
Broad Social ImpactAdvance solutions to global challenges, including financial inclusion, climate change, conservation, access to healthcare, equity and inclusion, and proper corporate governance

With the impact goals in place, we then focused on the financial portfolio design parameters. We looked at the portfolios’ goals related to geographic diversification, risk, and liquidity to help us determine an appropriate asset allocation for the portfolios. The sum of this work resulted in the following parameters, which were created when we implemented the portfolio in October of 2019 and still guide the portfolio today:

Geographic Diversification 70% US, 30% International
Risk Moderate, with an emphasis on matching the financial risk and return profile of NPT’s conventional moderate risk profile portfolios
Liquidity Daily
Asset Allocation 65% Public Equity, 20-30% Fixed Income, 0-10% Alternative Investments, 5% Cash

With impact goals, financial parameters, and asset allocation in place, we went to work on the final piece of the design process: investment selection.

The result of this work is what NPT offers today: four unique portfolios that provide exposure to impact investments across the asset classes of public equity, fixed income, and alternatives. Each portfolio has a designated set of impact-oriented core holdings that provide diversified impact options in the liquid investment space. Each portfolio also has a select number of thematic satellite investments. These investments provide exposure to solutions-oriented businesses, sectors, and strategies helping to achieve the impact goals outlined for each portfolio.

What have been the results?

Looking back on managing these portfolios for over three years, we are energized by their growth and impact. In terms of total assets, these portfolios have grown to over $15 million since inception date of October 18, 2019, as over 100 donors have invested portions of their donor-advised fund assets into the portfolios. Additionally, we believe that the performance of these impact portfolios has been competitive with traditional market investments.1

Though growing assets and competitive performance are important indicators of success, measuring impact is critical to assessing how these portfolios are performing against their stated goals. Each year, CapShift creates impact reports that provide an assessment of negative exposure to traditional Environmental Social and Governance (ESG) risks and positive exposure to impact solutions. Impact reporting helps us to evaluate a fund’s relative performance through the lens of impact key performance indicators. For example, our 2022 impact reporting tells us that the NPT’s Environmental Stewardship Portfolio has 50% less than its benchmark in industrial greenhouse gas emissions2 and has 62% greater exposure to clean energy companies.3 These results are exciting as they indicate that the portfolio is meeting its goal of managing climate risks and investing in future technology that seeks to help protect our planet. For more of these impact insights, check out the impact reports for all four portfolios here.

Each impact investment portfolio provides donors with a single investment vehicle for pursuing solutions that align with their values and philanthropic goals. Learn more about the thematic impact investment portfolios and how you can invest in them here.

[1] Source: “Investment Descriptions and Performance Impact Portfolios” National Philanthropic Trust. December 31, 2022. https://www.nptrust.org/wp-content/uploads/2023/03/Investment-Descriptions-and-Performance-NPT.pdf

[2] Source: YourStake data as of 12/31/2022 compared to Portfolio Specific Benchmark. Greenhouse gas emissions, in Carbon Dioxide Equivalents, from facilities as reported to North American and E.U. Pollutant Release and Transfer Registers. Facilities that emit at least 25,000 metric tons of GHG emissions are required to report in the USA, and facilities that emit at least 100,000 metric tons of CO2 or at least 100 metric tons of Methane are required to report in the E.U.

[3] Source: YourStake Data as of 12/31/22 compared to compared to Portfolio Specific Benchmark. The Portfolio Specific Benchmark is created by weighting each underlying funds’ benchmark in accordance with that fund’s weighting in the portfolio. Top 200 companies by clean energy economy revenue, including energy efficiency and finance of low-carbon solutions, and companies with business models and revenue sources fully in support of the clean energy economy.

About CapShift

CapShift’s impact investing platform and suite of solutions empower financial and philanthropic institutions, and their clients, to invest in their vision for a better tomorrow. We do this by providing rigorously researched, easy to access, and cost-effective impact investing and recoverable grant opportunities to donor advised fund holders, family offices, advisors, and foundations. Visit capshift.com to learn more about us and the capital that we have mobilized for purpose to date.