… Something Borrowed, Something Green

Part Three of Three Parts

The TakeAway: A growing number of foundations achieve sustainability and social justice goals through program-related and mission-related investing.

In 2007, the Los Angeles Times ran a series of stories about the Bill & Melinda Gates Foundation, including one called “A Dark Cloud Over the Gates Foundation,” that hit the foundation world like a bomb.  Research revealed that the Gates Foundation held $8.7 billion of assets (of a total $35 billion portfolio) in companies that directly contradicted its grantmaking objectives, charitable purpose, and “socially concerned philosophy.”  The Times series acted as a wake-up call to reputational risk to all foundations engaging in “blind eye investing”.  No longer would such practices be acceptable, particularly given the development over the past 30 years of a robust corporate social responsibility and social investment infrastructure offering products and services in every imaginable asset class, and Web 2.0 technologies creating instant transparency and drawing public attention to discrepancies between mission and money.

Borrowed Authority | This new reality serves as a reminder that foundation officials essentially borrow their authority from donors’ original intent.  They are stewards of other people’s money  whose financial performance has plummeted, and therefore must look for prudent and creative ways of furthering charitable purpose with fewer financial resources.  That’s why more than 130 foundation executives and trustees, financial service providers, consultants, and academics turned out earlier this week for the “More for Mission: Expanding the Field” conference sponsored by More for Mission (M4M).  Supported by the Meyer Memorial Trust, the Annie E. Casey Foundation, and the F.B. Heron Foundation, M4M launched a few months after the LA Times series at the Council on Foundations 2007 annual conference.  The More for Mission Campaign hopes to generate $10 billion in new mission related investment (MRI) commitments – representing 2% of foundation assets – over the next five years.

Originally based at Boston College’s Center for Corporate Citizenship,  M4M (led by Lisa Hagerman) moved this past January to the Kennedy School’s Hauser Center for Non-Profit Organizations—along with the Initiative for Responsible Investment (IRI), founded as the Institute for Responsible Investment by Steve Lydenberg and led by David Wood.  Hagerman and Wood now write about the growing field of mission investing, placed within the broader context of socially responsible investments, in their article called “Mission Investing and the Philanthropic Toolbox”, which recently appeared in Policy and Society.

The Color of Money  | Money is money, and green is green.  Many foundations do mission investing, even if they don’t call it that, Wayne Pierson, Meyer Memorial Trust Chief Financial & Investment Officer, told M4M conference attendees.  They usually start with program-related investments (PRIs) – often directed to environmental causes, job creation, and community revitalization – but view them as part of their grantmaking.  Once they realize that these qualify as investments, “you can get them to move forward [and increase their PRI/MRI commitments],” he said.  “Build on what they already are doing.”

Thanks to CEO Doug Stamm and Pierson’s efforts, the Meyer Trust “has risen to a position of national leadership”, according to a Kennedy School case study about its 10% portfolio commitment to MRI.  The case includes a vignette about how Stamm and Pierson tricked Meyer’s five trustees and 31 money managers into believing that the LA Times’ “dark cloud” story, reformatted as the Portland Oregonian, was about them.

As for the Gates Foundation:  shortly after the 2007 story appeared, then-Foundation Chief Executive Patty Stonesifer issued a series of announcements, stating the Foundation would examine its investment policies, but then backed away.  In September 2008, it published a statement about its investment  approach.  A year after that, the Foundation unveiled its new policy for program-related and mission investing.

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