January 19, 2017

Foundations: Do Your Investments Undermine Your Mission?

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Three women standing together

Why would a foundation focused on improving the environment invest in fossil fuels?

For a variety of reasons perhaps, but it comes at a cost. Many foundations are investing their endowment in ways that are at cross purposes with their mission, and doing so might actually be impairing their effectiveness in solving the environmental and social issues they care about.

The question is – would they change their investment strategy if there was another way?

A recent survey of 200 foundations found that only one in three were strategically investing their endowment to align with their mission. However once exposed to the concept of socially responsible investing, foundation leaders were open to considering alternative investing strategies.

The IRS released guidance in 2015 which made explicit that nonprofit boards could embrace the role of civic fiduciary, and consider charitable impact as one factor in making prudent investment decisions. Since then, foundations have increasingly been exploring different ways of investing for positive impact by making mission related investments and applying environmental, social, and governance screens to their investment portfolio.

Read this new series – Mission Possible – by the Mission Investors Exchange and Stanford Social Innovation Review for more information on how foundations can shape the future of impact investing.

A New Way to Invest

Enterprise is helping foundations align money and mission through our Enterprise Community Impact Note. More than 150 investors - individuals, universities, hospitals, and nonprofits - have invested $60 million to support housing, schools, health clinics and small businesses throughout the nation.   

The Impact Note makes it much easier for foundations to support Main Street by diverting money from Wall Street. For example, The Kresge Foundation recently invested $3 million in Enterprise Community Loan Fund to seed our 10-year commitment to revitalizing an historic corridor in Detroit, and six local foundations have made investments through Our Region, Your Investment to address Washington, D.C.’s housing crisis. For many Impact Note investors, like the Meyer Foundation, this is their first impact investment!

If you are interested in learning about how you or your foundation can invest for good, contact me at RRCarroll@EnterpriseCommunity.org.