Foundations Aligning Investments With Their Missions

While foundations traditionally have kept the management of their endowment funds separate from their grantmaking activities, some are aligning more of their investments with their missions, the reports.

Seeing their endowments as a tool that can help them pursue their philanthropic goals, some foundations have opted to eschew investments that might be regarded as unethical or counter-productive, including investments in arms manufacturers, tobacco companies, and/or fossil fuel companies. For example, more than a hundred and twenty-five foundations have signed on to the campaign, which calls on foundations to divest their portfolios of investments in the two hundred largest fossil fuel companies and invest at least 5 percent of their assets in renewable energy, energy efficiency, and clean technology within a five-year period.

Other foundations are turning to impact investments, which are designed to generate a social as well as financial return. For a foundation interested in combating poverty, this might mean investing in a company that is creating jobs in a low-income neighborhood, building affordable housing, or providing a range of financial services to low-income individuals. In 2015, the announced that it would allocate $350 million, or 10 percent of its endowment, to mission- and program-related investments over the next five years. Rob Manilla, Kresge's chief investment officer, likened the approach to a target with a bullseye: At the center are investments directly related to the foundation's mission of improving life for underprivileged urban communities, while around it are investments in other areas in which it works. Elsewhere, the New York City-based , which in 2012 pledged to commit all its assets to fighting poverty, has aligned about 70 percent of its endowment assets with its mission, up from 40 percent five years ago. "We've broken down the traditional wall that separates the investment side from the giving side," said Heron president Clara Miller.

Still, foundations that dedicate a portion of their endowments to impact investing remain a minority, and a survey of nearly seven hundred U.S. foundations found that more than half do not and have no plans to engage in mission investing. Foundation Center president Bradford K. Smith believes that will change, however, as impact investing becomes more mainstream. "It's gaining credence," he told the FT. "The argument against this was always that there weren't reliable investment vehicles out there that would give you competitive market rate returns. That's starting to change."

Sarah Murray. "." Financial Times 05/06/2016.