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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.

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