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Investing with impact in the endowment space

Note, the Impact Investing Institute uses the GIIN definition of impact which covers private and public investing : 'investments made with an explicit intention to generate positive, measurable social and environmental impact alongside a financial return'.

First, their extended case for impact in summary (after a legal section basically saying it’s OK for foundations to invest in-line with their values), touches on themes we’ve expressed for FCI broadly:

  • Expands the outcomes and influence possible by the investing foundation. Good acts and grants have intentional outcomes, asset can too if invested properly. Also investing is signaling and leverage– a foundation’s investment actions can lead other like investors to make the same moves, thus amplifying a foundation’s intentions.

  • Not all targeted issues can be addressed solely through good acts and grants. Exxon & Engine #1 example – sometimes investment is needed to make a change in the private sphere.

  • Avoid embarrassment – your foundation does good acts and grants on an issue that your assets may be working against. There is a public perception and expectation that all a foundation’s activities would support its mission.

Then, HOW 'Steps to becoming an impact investing endowment' include some of the themes we covered in a post last week:

A) Obtain an internal mandate for impact investing

B) Establish financial and impact requirements for the endowment

C) Update the Investment Policy Statement

D) Integrate impact and investment at board and staff level to deliver the strategy

E) Work with investment advisors, investment managers and asset managers with skills and experience in impact

The Impact Investing Institute helpfully created a powerpoint presentation to use for 'A'. No additional direction provided on 'B' and 'C', though helpful examples. A gentle recommendation on 'D' to have investment and grant staff work together (something we heard from Trinity Wall Street), though they mostly recommend hiring skilled people, which…for 'E' the guide lists and 'consulted with' managers 'with strong impact practices' – implying they’re a place to start for recruiting.

They include an example search process from an organization we worked with last year – Ufi VocTech on their impact program. The hard and expensive work is in these details, adding skills to staff is no quick or costless process, but for organization considering impact investing, knowledge of all the needs before stepping into 'A' is very important, we can help.


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