Mission Alignment Marks Next Frontier of Endowment Investing

Society’s problems will not be solved by grantmaking alone, according to the US-based Nathan Cummings Foundation which has announced it is moving to 100 per cent mission-aligned impact investing.

In March the foundation revealed it will align all of its half-billion dollar endowment with efforts that advance its mission of “creating a more just, vibrant, sustainable, and democratic society and finding solutions to the climate crisis and growing inequality”.

The move which has been more than a year in the making and follows a process involving its board, staff, and advisors, makes the foundation one of the largest foundations to commit 100 per cent.

NCF president Sharon Alpert said the decision reflected the changing investment landscape.

“Our decision reflects our values and our aspirations, our assessment of the market, and the opportunity for NCF to both join and leverage a chorus of philanthropic and private sector investors changing the landscape for investing and the business model of philanthropy,” Alpert said.

“The problems we are working on – like the climate crisis and growing inequality – will not be solved by grantmaking alone.

“Capital markets have to change to drive sustainable and inclusive growth that will create long-term value for people, the planet, and the economy. How we invest our assets and leverage our influence as an investor are powerful tools to make that change to happen.”

Carly Hammond, impact investment forum program manager at the Responsible Investment Association Australasia, told Pro Bono News it was pleasing to see “a pioneering foundation of this size commit 100 per cent of its corpus to impact investing”.

“It highlights a growing recognition by trusts and foundations of the greater impact that can be achieved when they go beyond grant-making to harness their endowment, which is typically much larger,” Hammond said.

“For many philanthropists, the impact investment journey begins by dipping their toe in the water with one or two impact investments, watching to see that they perform financially and impact-wise, and then exploring other opportunities to align investments with their mission and values”.

NCF joins a growing number of US foundations which are aligning their investments in companies and strategies that advance their missions.

In 2016 the F.B. Heron Foundation announced it had officially moved to investing 100 per cent of its $300 million endowment into impact, and in the same year the Ford Foundation committed up to $1 billion from its $12 billion endowment over the next 10 years to mission-related investing.

NCF Trustee Rey Ramsey said the move came at the right time.

“This is a concrete step that illustrates that capital can and must reflect our values to advance social issues,” Ramsey said.

“It comes at the right time because we have capital disparities in far too many communities where quality ideas and business plans go unfulfilled.

“Our commitment not only advances philanthropy and impact investing, it advances the work of our partners on the frontlines of these issues.”

The foundation has already begun looking at all of its investments to assess their alignment and develop a pipeline of aligned investment strategies across all asset classes.

It said it would provide an update at the end of the year to support other foundations that plan to leverage their endowments to increase impact.

Philanthropy Australia CEO Sarah Davies told Pro Bono News there was a growing number of foundations around the world who were moving to and wanted to move to mission-aligned investing.

“We see more and more Australian foundations considering mission related investing and impact investing, with many already well on the way, often starting by allocating a percentage of assets to impact aligned investments,” Davies said.

“It is definitely an exciting and growing approach to increasing impact and change.

“We are also seeing the professional investment managers and providers responding to the growing interest and demand, with many offering specific products and impact screens.”

She said she saw it as a key part of the future of philanthropy.

“From the point of view of philanthropy, it is obvious that the capital investments that are core to the structure of planned and structured giving are an opportunity for mission-aligned and/or impact investment, because they are two different things,” she said.

“Obviously the more of that capital that can be set to work for purpose, the more resources we’ve got out there charging away at change.

“But it is not just philanthropy, it is also the corporate capital market, superannuation, and it is also everyday investors, for values driven investing, so if I’ve got a small share portfolio or my own self managed super fund, I think we will see increasing interest from everyday investors, in values based investment.”

Davies said to make a step change in harnessing the potential of mission-aligned and impact investing, Australia needed to continue to grow the amount of capital as well as the pipeline of investment opportunities.  

“It is about showing people how many opportunities there are to chase the purpose and chase the change,” she said.

“And to do this well, we need good market-makers, enablers and intermediaries who help build quality, informed investors, quality opportunities and the right infrastructure and environment.

“We did a study tour to the UK last year and in fact we’ve just come back from a study tour in Israel. And one of the things that was very apparent to me in looking at where they are really accelerating their mission related investing and impact investing is the appetite of the sector as a whole, and of philanthropy, to fund those market makers and intermediaries, to invest in the ecosystem within which this will thrive.

“I’m not sure we have the same appetite here and I think it is something we should look at.”