ESG Investing: What Nonprofit Leaders Need to Know

On September 30, Charissa Anderson, CFP®, CDFA, and Krystal Daibes Higgins, CFA, presented “Mission-Aligned Investing: Practical Approaches to the ‘E’ in ESG” to attendees of the Association of Zoos and Aquarium (AZA) Annual Conference 2026 in Portland, Oregon. Although the presentation was designed for nonprofit leaders focused on conservation, education, science and recreation, the topics are applicable to any mission-driven organization seeking alignment across their initiatives.

While developing this presentation, our team was motivated to share our interests and perspectives in ESG as board members to several AZA-accredited institutions and their foundations, including the Oregon Zoo Foundation, the Oregon Coast Aquarium and the High Desert Museum. We hope this blog is helpful to those curious about the nuances of ESG and who serve in similar roles.

What is ESG?

ESG stands for environmental, social and governance, which is an investment approach that incorporates managing risks and opportunities beyond traditional financial metrics. Environmental factors might include carbon footprint or resource use. Social factors often cover labor practices, community impact and animal welfare. Governance looks at board structure, executive compensation and transparency. ESG isn't a single strategy; it's a lens that can be applied in many ways, which is part of why it's so often misunderstood.

The Pressures Driving ESG Interest

Across the nonprofit sector, three pressures tend to drive interest in ESG:

• Donor and stakeholder expectations: Major donors, foundations and board members increasingly ask how endowment dollars align with organizational values and want visibility into how investment decisions are made.
• Mission alignment: Many nonprofits feel a natural pull to ensure their investments don't work against their stated purpose, creating consistency between what an organization says publicly and how it manages its capital.
• Reputational risk: In an era of public scrutiny, a mismatch between an organization's public values and its investment portfolio can become a headline problem, affecting donor trust and community standing.

Common ESG Myths

A few misconceptions come up repeatedly:

• “ESG always means sacrificing returns.” Academic research is mixed and highly dependent on time period, methodology and sector weighting. There's no consistent, universal performance penalty or premium.
• “ESG limits portfolio diversification.” ESG portfolios can still maintain broad exposure across sectors and industries. In practice, many ESG strategies are designed to look and behave much like the broader market while incorporating ESG considerations into the investment process.
• “ESG costs more.” Morningstar found that the average ESG fund costs fell from 1.55% in 2013 to 0.82% in 2024, putting them roughly in line with conventional fund fees.

Approaches to ESG Implementation

There isn’t one way to incorporate an ESG strategy for investments. Common approaches include:

1. Exclusionary or positive screening: Exclusionary means removing specific industries or companies (e.g., tobacco, weapons, fossil fuels) from the investable universe. Positive screening on the other hand looks for companies that are performing better than their peers on the ESG factors.
2. Thematic investing: Actively directing capital toward specific themes, such as clean energy or conservation-related companies.
3. ESG integration: Incorporating ESG data as one factor alongside traditional financial analysis, without excluding sectors outright.
4. Shareholder engagement/proxy voting: Using ownership stakes to influence corporate behavior directly.
5. Combination strategies: Many institutional portfolios blend two or more of the above, tailored to the organization's specific priorities and risk tolerance.

Evaluating ESG Managers

Choosing an ESG-oriented manager requires the same rigor as any manager search, plus a few ESG-specific questions:

• Methodology: Is their ESG process integration-based, exclusionary, thematic or a blend? Ask them to walk through a real portfolio decision.
• Data providers: Which third-party ESG data or ratings do they rely on (MSCI, Sustainalytics, ISS, etc.)? Each data provider could rate the same company differently.
• Consistency and transparency: Can they show a documented, repeatable process rather than ad hoc judgment calls?
• Reporting: Will you receive specific, tailored reporting on ESG metrics and holdings, not generic overviews?

The Bottom Line

ESG isn’t a monolith, and it isn’t inherently a trade-off against fiduciary duty. For nonprofits, the real work is defining what alignment with your mission actually means in investment terms, then finding managers whose process reflects your perspective and goals.

Conversation Starters for Nonprofit Professionals and Board Members

Does adopting an ESG approach violate our fiduciary duty to the endowment?

Not inherently. Fiduciary duty requires prudent, informed decision-making in the best interest of the institution. Considering ESG factors as part of its investment strategy may be consistent with this duty depending on regulations, donor restrictions and an organization’s circumstances. Boards should always document its reasoning and not sacrifice diversification or due diligence in the process.

Will an ESG strategy cost us investment performance?

There's no reliable evidence of a consistent return penalty or premium tied to ESG investing broadly. Performance varies by strategy, time period and how narrowly or broadly ESG criteria are applied, which is why it's important to evaluate proposed strategies on their specific holdings and historical behavior, not on the ESG label alone.

How do we know if a fund is genuinely ESG-focused versus "greenwashed?”

Ask the proposed manager for specific methodology, data sources and examples of how ESG factors changed a real investment decision. A credible manager can show their work; a marketing-driven one will speak mostly in generalities.

Do we have to choose one ESG approach, or can we combine strategies?

Most institutional portfolios use a blend. For example, light exclusionary screens combined with ESG integration in manager selection. The right mix depends on your board's priorities, risk tolerance and how directly you want your mission reflected in the portfolio.

Does Ferguson Wellman offer an ESG strategy?

Yes. Ferguson Wellman offers an ESG strategy called Global Sustainable Investing (GSI). This strategy utilizes an ESG screen that is layered upon our existing fundamental security analysis, providing similar risk-return characteristics to our traditional portfolios. Ferguson Wellman manages $639 million in its GSI strategy for individuals, family foundations and nonprofits. (as of September 30, 2026)

Curious to learn more? We’d love to connect with you over coffee or virtually. Contact Us

Disclosure

The views expressed represent the opinion of Ferguson Wellman. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections and other forward-looking statements are based on available information and Ferguson Wellman’s views as of the time of these statements. Past performance may not be indicative of future results. Ferguson Wellman, Octavia Group and West Bearing do not provide tax, legal, insurance or medical advice. This material has been prepared for general educational purposes only and not as a substitute for qualified counsel who can determine how this information applies to you. We believe the information provided is from reliable sources but should not be assumed accurate or complete.

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