Taking into account ESG factors in the investing process is on the rise within the not-for-profit space, resulting in a need for a new kind of investment expertise.

There is a clear trend of non-profit organisations incorporating environmental, social and governance factors into their investment journeys, yet barriers surrounding terminology and the ESG investment process are resulting in a need for expertise and guidance that go beyond the traditional remit of non-profit organisations.

That’s the view of Georges Dyer, executive director at Intentional Endowments Network & Gilles Lavoie, not-for-profit investment consultant, Mercer Canada, speaking on the Critical Thinking, Critical Issues podcast with host Paul Fleming, Mercer’s UK head of endowments and foundations.

Dyer’s day-to-day role sees him support endowments in positioning investment policies with institutional mission, values, and sustainability goals. The network consists of over 200 members, including leading universities, foundations, outsourced CIO firms and consultants, investment managers, and nonprofit partners.

Lavoie offers a complementary expertize , specialising in optimising risk-adjusted returns for Mercer’s institutional investors and is a part of the global not-for-profit team that collated this year’s global not-for-profit investment survey. In a wide-ranging discussion, the two industry experts outlined the need for non-profit foundations to deeply consider the change they can invoke by leveraging ESG expertise and frameworks to expand on non-profits’ principled approaches to financing.

In a practical sense, looking at ESG factors is about evaluating financial risks “explicitly and systematically,” Dyer explained. If not-for-profits can be effective in “identifying the risks and opportunities” than come through a scrutinous ESG lens, then the outcome is simple: “better long-term investing.”

Lavoie echoed this sentiment, noting that “virtuous” organisations now have an opportunity to reflect their intrinsic values in their investment programs and present a more coherent alignment to their key stakeholders.

Increasingly, such organisations are turning to ESG factors as they see it as being aligned with their overall fiduciary duty. As such, 72% of non-for-profits intend to increase their exposure to ESG-focused investments over the next 12 months.

But Lavoie said that ESG investing within the not-for-profit space goes beyond fulfilling fiduciary duties – it’s about spearheading meaningful societal change, particularly in the interconnected areas of climate change and diversity, equality and inclusion.

The demand from non-for-profits for such strategies is so prevalent that attitudes to risk and returns are being altered. Now, 36% of respondents believe they will have to make compromises when closing the gap between ethics and investment returns, and of that group, more than half believe that compromise will have to come in the form of limited absolute returns.

“If we're talking about risk, we're talking about returns being somewhat impacted, but they're still putting these opportunities out there,” Lavoie said, noting a recent example of a discussion with a colleague, noting how the “decisions and practices” being made around ESG investing can impact factors as prevalent as searing heatwaves seen globally this year.

“But the opposite is true as well,” he said. “If you don't do anything, climate change will have an impact on your portfolio, because the companies you're investing in will be impacted by climate change. Irrespective of what it is that you do, there will be an impact. It's important to understand the issue from these two perspectives: how your portfolio is affecting climate transition and how your portfolio is exposed to climate transition, and then see how you're able to adjust this if you're uncomfortable with the risks involved,” he added.


MercerInsight® Community

Connecting investors for richer insights.

Join our community for complimentary access to Mercer's latest insights and those of the broader asset management industry. Everything you need in one place to help you make informed decisions about your investments.



For not-for-profits, understanding where they sit on the risk spectrum while considering the non-financial outcomes they hope to invoke is paramount and demands a scope of expertise that goes beyond traditional portfolio management.

56% of respondents to Mercer’s global not-for-profit survey view climate change as an investment opportunity over the next three years and is the second-greatest opportunity identified overall. But on the back of that, portfolios have ratcheted complexity, with 44% stating their portfolios are more complex today than they were three years ago. As a result, seven in ten not-for-profit groups have already turned to external investment support to bolster their ESG capabilities.

Dyer pointed to some of the challenges facing not-for-profit groups, namely around “data access, lack of standardization, fees, and greenwashing.”

As asset owners, the best way to overcome these issues is by “doing due diligence, working with portfolio managers, before and after the selection process and engaging with existing leaders to help address some of these issues.”

Similarly, Lavoie said the evolving nature of consultancies and managers will place not-for-profit groups in good stead, having already had to learn from and “navigate the pitfalls” of ESG investing for specialised clients.

“It is going to be interesting to see how the market will continue to evolve further and meet the demands of clients,” he said.

Important Notices


References to Mercer shall be construed to include Mercer LLC and/or its associated companies.


© 2022 Mercer LLC. All rights reserved.


This content may not be modified, sold or otherwise provided, in whole or in part, to any other person or entity without Mercer's prior written permission.


Mercer does not provide tax or legal advice. You should contact your tax advisor, accountant and/or attorney before making any decisions with tax or legal implications.


This does not constitute an offer to purchase or sell any securities.


The findings, ratings and/or opinions expressed herein are the intellectual property of Mercer and are subject to change without notice. They are not intended to convey any guarantees as to the future performance of the investment products, asset classes or capital markets discussed.


For Mercer’s conflict of interest disclosures, contact your Mercer representative or view here.


This does not contain investment advice relating to your particular circumstances. No investment decision should be made based on this information without first obtaining appropriate professional advice and considering your circumstances. Mercer provides recommendations based on the particular client's circumstances, investment objectives and needs. As such, investment results will vary and actual results may differ materially.


Information contained herein may have been obtained from a range of third party sources. While the information is believed to be reliable, Mercer has not sought to verify it independently. As such, Mercer makes no representations or warranties as to the accuracy of the information presented and takes no responsibility or liability (including for indirect, consequential, or incidental damages) for any error, omission or inaccuracy in the data supplied by any third party.


Funds of private capital funds are speculative and involve a high degree of risk. Private capital fund managers have total authority over the private capital funds. The use of a single advisor applying similar strategies could mean lack of diversification and, consequentially, higher risk. Funds of private capital funds are not liquid and require investors to commit to funding capital calls over a period of several years; any default on a capital call may result in substantial penalties and/or legal action. An investor could lose all or a substantial amount of his or her investment. There are restrictions on transferring interests in private capital funds. Funds of private capital funds’ fees and expenses may offset private capital funds’ profits. Funds of private capital funds are not required to provide periodic pricing or valuation information to investors. Funds of private capital funds may involve complex tax structures and delays in distributing important tax information. Funds of private capital funds are not subject to the same regulatory requirements as mutual funds. Fund offering may only be made through a Private Placement Memorandum (PPM).


Not all services mentioned are available in all jurisdictions. Please contact your Mercer representative for more information.


Investment management and advisory services for U.S. clients are provided by Mercer Investments LLC (Mercer Investments). Mercer Investments LLC is registered to do business as “Mercer Investment Advisers LLC” in the following states: Arizona, California, Florida, Illinois, Kentucky, New Jersey, North Carolina, Oklahoma, Pennsylvania, Texas, and West Virginia; as “Mercer Investments LLC (Delaware)” in Georgia; as “Mercer Investments LLC of Delaware” in Louisiana; and “Mercer Investments LLC, a limited liability company of Delaware” in Oregon. Mercer Investments LLC is a federally registered investment adviser under the Investment Advisers Act of 1940, as amended. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Mercer Investments’ Form ADV Part 2A & 2B can be obtained by written request directed to:  Compliance Department, Mercer Investments 99 High Street, Boston, MA 02110.


Certain regulated services in Europe are provided by Mercer Global Investments Europe Limited and Mercer Limited.


Mercer Global Investments Europe Limited and Mercer Limited are regulated by the Central Bank of Ireland under the European Union (Markets in Financial Instruments) Regulation 2017, as an investment firm. Registered officer: Charlotte House, Charlemont Street, Dublin 2, Ireland. Registered in Ireland No. 416688. Mercer Limited is authorized and regulated by the Financial Conduct Authority. Registered in England and Wales No. 984275. Registered Office: 1 Tower Place West, Tower Place, London EC3R 5BU.


Investment management services for Canadian investors are provided by Mercer Global Investments Canada Limited. Investment consulting services for Canadian investors are provided by Mercer (Canada) Limited.