Navigating Uncertainty: Investment considerations for NFP organisations

While a severe global downturn is not currently expected, the likelihood of an economy with weaker growth, persistent inflation and elevated volatility has increased. For long-term investors, this reinforces the importance of disciplined portfolio construction, strong governance and ensuring investment strategies remain resilient across a broader range of economic outcomes.

For NFP organisations, this presents a challenging operating environment: maintaining financial sustainability while continuing to deliver against organisational purpose and growing community needs.

Investment portfolios are therefore not simply financial assets – they are an important foundation supporting future impact, resilience and long-term purpose delivery.

Against this backdrop, there are several practical steps organisations can take to position themselves effectively:

1. Review current assets and investment strategy

NFP investment strategies must always remain aligned with their purpose. However, in an environment of structural change – including AI, energy transition and shifting policy regimes – flexibility and diversification is increasingly important.

Organisations should periodically review their investment objectives and strategic asset allocation to ensure they remain fit-for-purpose under a broader range of economic outcomes. This includes assessing:

• Exposure to structurally advantaged sectors (e.g. AI-driven growth)
• Sensitivity to inflation and interest rate volatility
• Geographic diversification, particularly given widening regional growth differentials

The opportunity set continues to evolve, and portfolios should evolve with it.

2. Focus on the risks that matter most

The current environment is being shaped by multiple interactive risks – including inflation, policy uncertainty and geopolitics.

NFPs should revisit their risk frameworks with a focus on understanding which risks are most relevant to their organisation’s objectives and purpose delivery. This may include:

• Inflation risk: Persistent above-target inflation increases operating costs and may erode real returns
• Geopolitical risk: Energy price shocks and policy uncertainty can drive market and inflation volatility
• Policy risk: Central banks face a more constrained trade-off between growth and inflation
• Market risk: Higher volatility and tighter financial conditions increase downside sensitivity

A critical question is not just what risks exist, but which ones can – and should – be managed  through portfolio construction and governance frameworks.

3. Position for resilience and opportunity

Periods of uncertainty can create both risks and opportunities. Market volatility—particularly if driven by cyclical slowdowns or liquidity tightening—can result in dislocations across asset classes.

To respond effectively, NFPs should aim to have a clear understanding of their liquidity profile and tolerance for illiquidity. This will ensure financial assets are sufficiently flexible to meet operational needs, undertake effective and opportunistic portfolio rebalancing and where appropriate, enhance long-term returns through high quality unlisted investments.

4. Revisit spending sustainability

The combination of higher service demand and more uncertain return environments places increased pressure on NFP spending frameworks.

Many organisations may be drawing more than planned on their investment corpus to support operations. While this may be necessary in the short term, sustained higher spending rates can materially impact long-term financial sustainability—particularly in a world of:

• Lower real return expectations (due to inflation persistence)
• Higher volatility in asset markets
• Less supportive policy settings

A review of spending policy should therefore focus on:

• Alignment between spending rates and expected returns
• Scenario analysis under weaker growth outcomes
• Flexibility mechanisms to adjust spending if conditions deteriorate

5. Continue the transition: ESG and structural change

Long-term structural shifts – particularly the transition to a lower-carbon economy and the rise of AI – are reshaping economies, industries and investment markets.

For long-term investors, such as NFP organisations, this reinforces the importance of understanding how structural change may impact future portfolio and risk opportunities. This may include:

• Integrating ESG and structural themes into investment strategy
• Undertaking carbon footprint analysis and transition planning
• Identifying opportunities to “future-proof” portfolios against long-term shifts

Bringing investments back to purpose

While today’s environment presents challenges, it also reinforces the importance of thoughtful long-term investment governance.

For NFP organisations, investment portfolios are not simply financial assets – they help fund future impact, support communities and underpin long-term sustainability. Organisations that remain aligned to their purpose, understand the risks most relevant to them and maintain disciplined long-term decision-making are often best placed to navigate periods of uncertainty successfully.