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6 posts categorized "Mission-Related Investing"

Labor Day Weekend Link Roundup (September 1-2, 2013)

September 01, 2013

Laborday2013A special holiday weekend roundup of new and noteworthy posts from and about the nonprofit sector....

Civil Rights

On its NOW blog, the Georgia Center for Nonprofits commemorates the fiftieth anniversary of the March on Washington for Jobs and Freedom with a look at the persistant disparities in employment, educational achievement, and upward mobility between Afrian Americans and whites as illustrarted by several recently released reports.

Before the fiftieth anniversary becomes a footnote, be sure to take a look at the ten-part Washington Monthly series on race in America that we re-posted here on PhilanTopic in the weeks leading up to Wednesday's events.

Communications/Marketing

From the folks at Optimind Technology, here's a great infographic with thirty digital marketing statistics you can't afford to ignore.

Impact/Effectiveness

Writing in the Chronicle of Philanthropy, William Burckart, managing director of Impact Economy's North America unit and a contributing author to the forthcoming New Frontiers of Philanthropy (Lester M. Salamon, ed., Oxford University Press), argues that impact investing, one of the buzziest memes in philanthropy at the moment, "is not well understood outside of a relatively small group of early adopters, and even this band of innovators harbors multiple, sometimes-incompatible interpretations of the concept." What's more, writes Burckart, although this "form of foundation investing has long been approved by government regulators," outside of a handful of foundations -- Ford, F.B. Heron, Kellogg, Mary Reynolds Babcock, K.L. Felicitas -- "it is an idea that has never gotten much traction."

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Foundations and the 'New Normal': A Q&A With Bradford K. Smith, President, Foundation Center

June 10, 2013

(The following Q&A with Foundation Center president Bradford Smith appears as part of a special feature on "Philanthropy in a changing world economy" in the June 2013 issue of Alliance magazine. It is reprinted here, with minor revisions, courtesy of Caroline and her team.)

Headshot_brad-smith2Caroline Hartnell: To what extent are U.S. foundations changing in response to austerity?

Bradford K. Smith: I started this job two weeks after Lehman collapsed. On my first day in the office, we had a press call about what foundations were doing about the economic crisis. I put down the phone and walked down the hall to our research department and said, "Quick, I need a statistic," and they came up with a really good one. Foundation giving for the previous year, 2007, was around $45 billion -- about 6 per cent of the first stimulus package announced by the federal government. So one thing the crisis really showed up was the scale of foundation resources. When the economy gets into serious trouble, it takes government to try to keep it from collapsing. Foundation dollars alone aren't enough to solve problems. That made foundations think more about how they can leverage money from each other, how they can collaborate with other sectors rather than trying to do it themselves.

A second interesting thing is that foundation giving held up quite well during the recession. One reason is that U.S. foundations calculate their mandatory payout on a rolling three-year average of the value of their assets, which cushions them from big market swings. It also held up well because foundations actually went beyond the federally mandated payout rate of 5 percent.

CH: The recession has changed things for the foreseeable future. Do you think U.S. foundations see this as a "new normal" and are rethinking their role?

BKS: I think most of them are adjusting to the idea that long-term expectations for returns on investment need to be reduced. 2012 was a good year in the financial markets, but nobody really expects that it will go back to the boom years when, as one foundation investment manager put it, for a number of years "all we had to do was get out of bed in the morning and we could make a 20 percent return on our endowment."

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[Infographic] Mission Investing

May 11, 2013

This week’s infographic provides some basic facts, courtesy of the data architecture team here at the Foundation Center, about the relatively small but growing field of mission investing, which encompasses both market-rate mission-related investments (MRIs) and program-related investments (PRIs).

The first program-related investment was made in the late 1960s, and the Foundation Center has been tracking foundation use of PRIs for more than sixteen years. The infographic below, which is partly based on a Foundation Center survey conducted in 2011 and on more recent research, reveals the staggering amount of assets available for mission investing and the geographic scope of such investments.

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Key Facts on Mission Investing

October 26, 2011

Using foundation assets to provide a public benefit has been called many things over the years: mission and mission-related investing; social, socially responsible, and responsible investing; environmental, social, and governance investing; and impact investing. There are differences in terminology and methodology, but the goal remains the same: to use foundation assets -- as distinct from foundation grants budgets -- to advance the public good while earning a market- (or below-market) rate of return.

This isn't new. Indeed, a small number of foundations have been making below-market-rate program-related investments (PRIs) for more than forty years. These investments, which often take the form of loans, loan guarantees, or equity investments, are derived from a foundation's corpus and count toward its charitable distribution requirements.

More recently, there has been an increased focus on market-rate mission-related investments (MRIs). This type of investment may broadly support a foundation's programmatic goals but it does not count toward its charitable distribution requirements.

In an attempt to benchmark the level of foundation engagement with mission investing, the Foundation Center included a series of questions on the topic in its January 2011 Foundation Giving Forecast Survey. Close to 1,200 independent, corporate, and community foundations with approximately $215 billion in assets responded. Of those, 168 foundations with $119.2 billion in assets indicated that they currently engage in some form of mission investing.

MI_type

MI_size

Here are some of the key findings from the survey:

  • About one in seven of the surveyed respondents (14.1 percent) currently engage in some form of mission investing (i.e., PRIs and/or market-rate MRIs).
  • Among the foundations that engage in mission investing, 50 percent hold PRIs, 28 percent invest in both PRIs and MRIs, and 22 percent hold only MRIs.
  • Larger foundations are more likely to hold mission investments, with about one-third (32 percent) of foundations that reported total giving of $10 million or more indicating they hold such investments, compared to 16 percent of foundations that reported total giving between $1 million and $10 million and 7 percent of foundations that reported less than $1 million in total giving.
  • Among foundations that hold mission investments, less than half (46 percent) have a formal investing strategy and/or policy statement in place.
  • Of the 82 respondents that make market-rate mission-related investments, just over a quarter (26 percent) have chosen to commit more than 50 percent of their assets to MRIs.
  • The most popular assets classes among foundations that hold MRIs were fixed income, public equity, and/or cash equivalents.
  • The majority of foundations have been making MRIs for five years or less, with just over half of these foundations starting within the last two years.

MI_duration

The survey also revealed that the financial crisis and recession which followed appears to have had minimal impact on the number of foundations making greater mission-related use of their assets through MRIs. Indeed, only two of the twenty-three foundation respondents that started making MRIs within the last two years did so in response to the downturn.

To download a free copy of the report (4 pages, PDF) based on the survey, click here.

And to learn more about the burgeoning field of mission investing, be sure to check out these excellent resources:

Bugg-Levine, A., and J. Emerson, Impact Investing: Transforming How We Make Money While Making a Difference, John Wiley & Sons, 2011.

Global Impact Investing Network (GIIN) and Impact Reporting and Investment Standards (IRIS) Initiative, Data Driven: A Performance Analysis for the Impact Investing Industry, 2011.

Godeke, S., and D. Bauer, Philanthropy’s New Passing Gear: Mission-related Investing: A Policy and Implementation Guide for Foundation Trustees, New York: Rockefeller Philanthropy Advisors, 2008.

LaVoie, V., and D. Wood, Handbook on Climate-Related Investing Across Asset Classes, Boston, MA: Boston College Center for Corporate Citizenship, 2009.

Lawrence, S., "Doing Good with Foundation Assets: An Updated Look at Program-Related Investments," The PRI Directory: Charitable Loans and Other Program-Related Investments by Foundations, 3rd Edition, New York: Foundation Center, 2010.

Lindblom, L. E., and L. S. Campos, Changing Corporate Behavior through Shareholder Activism: The Nathan Cummings Foundation’s Experience, New York: The Nathan Cummings Foundation, 2010.

Nissan, S., and M. Bolton, Opportunities for Mission Connected Investment, London: New Economics Foundation, 2008.

Richter, L., Guide to Impact Investing, Grantmakers in Health, 2011.

Viederman, Stephen, Investing As If The Future Mattered, Capital Institute, 2011.

Viederman, Stephen, Investing As If The Future Mattered: Harmonizing Giving and Investing as a Necessary Step for Foundations to Meeting the 'Public Benefit' Test, 2011.

Wood, D., and B. Hoff, Handbook on Responsible Investment Across Asset Classes, Boston, MA: Boston College Center for Corporate Citizenship, 2007.

Poverty and the Marketization of Philanthropy

September 23, 2011

(Bradford K. Smith is the president of the Foundation Center. In his last post, he wrote about the Jumo/GOOD merger, philanthropy, and social enterprise.)

End-wall-st-bull-collapsed-slide "Philanthropy is distorting markets for the poor!" exclaimed a prominent NGO leader at one of the many breakfasts held around Manhattan last week in connection with the Clinton Global Initiative. It was a statement intended to provoke, and it swirled around the table in a cloud of other market-friendly phrases ("impact investing," "social investment," "base of the pyramid," "shared value"). Finally someone said, "It's really confusing when everyone who makes grants, subsidized loans, or equity investments describes themselves as an investor." Which made me reflect on just how far the marketization of philanthropy has progressed. I mean, some days it seems like the last thing anybody wants to admit to being is a grantmaker!

To be fair, the intent of the provocation was to underscore the point that, today, there is a far wider range of market-based solutions available to address the needs of the poor than many of us might imagine. Yet beneath this whole discussion is an almost Rousseau-like view of "the poor" that informed an earlier generation of anti-poverty efforts. Then, foundations and governments poured significant amounts of money into "community development" abroad and "community building" at home while the kind of idealized communities they sought to promote were being buffeted by the politics of race, civil strife, immigration and, yes, markets, in the form of globalization.

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Mission-Related Investing: A Cautionary Tale

September 12, 2011

(David Jacobs is director of foundation information management at the Foundation Center. In his last post, he wrote about journalism, objectivity, and foundation funding.)

Roof-solar-panel Always eager to find ways to leverage their assets while advancing their organizational mission, foundations increasingly are turning to a new tool in the grantmaking toolbox: mission-related investments (MRIs) -- i.e., investing a portion of their assets to achieve both financial and social gains.

Such investments are still relatively new territory for many foundations. And as with anything new, we've see some early missteps that provide valuable learning opportunities for the field. Case in point is the bankruptcy of Solyndra LLC, a presidentially-hyped solar energy equipment manufacturer that received significant investments from the George Kaiser Family Foundation (among others), as well as more than half a billion in government loan guarantees.

According to a recent article in the Washington Post, Solyndra offered a unique solar-panel technology and the promise of four thousand "green" jobs. But the design proved to be too expensive to compete in the marketplace. The foundation attributed the loss of its investment in Solyndra to "the company's inability to overcome serious challenges in the marketplace, especially the drastic decline in solar panel prices during the past two years caused in part by subsidies provided by the government of China to Chinese solar panel manufacturers."

While the fallout from the bankruptcy may not be apparent for some time, it's not too early for those engaged in or considering MRIs to focus on some key takeaways that have presented themselves in the wake of the company's demise:

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