Mission investing: Unleashing foundations' full potential
By John Hamilton
The University of New Hampshire is using some of its endowment to serve the state's people by investing in opportunity statewide.
At a recent community impact investing event in Boston, investment advisors and consultants discussed how to help the board members of foundations get comfortable using some of their investments for mission purposes.
Mission investing is different than exclusionary investing, such as avoiding investments in, say, fossil fuel companies or weapons manufacturers. The goal is to channel a higher percentage of a foundation’s assets into investments that are aligned with its mission.
Many credit Clara Miller from Heron Foundation for this trend. In 2012, the foundation decided to move its endowment—then $270 million—into investments related to its mission of helping people and communities help themselves out of poverty. In fewer than five years, Heron became the first foundation to have 100% of its assets in what it calls a mission-aligned portfolio.
In doing so, Heron aligned the impact of its investments with that of the gifts and grants it was making using the interest from those investments.
The Intentional Endowments Network (IEN) was formed in 2015 to spread best practices among foundations considering investing their endowments for impact.
At IEN’s Community Impact Investing Roundtable in June, I participated on a panel (video inset) that discussed how and why the University of New Hampshire Foundation invested $3 million last year in the New Hampshire Community Loan Fund, a community development financial institution (CDFI).
Multiple factors led to investment
The convergence of UNH’s focus on sustainability, advocacy from concerned students, enhanced due diligence by the foundation’s investment consultant, and a receptive investment committee led to the foundation’s first impact investment (and first investment directly in a N.H. organization). UNH Foundation recently added another $1 million to its investment, this time in its Environmental, Social and Governance endowment portfolio.
The evolution of this relationship shows how change can happen and represents what is possible.
Another way to garner the support of foundation boards is to present impact investing as an integral part of a portfolio diversification strategy.
Low-risk investment buffers bear markets
Fixed-income options offer low risk/low financial returns that help weather down markets. CDFIs can offer returns competitive with those of other fixed-income investments, plus high mission impact. These are low-risk investments (the Community Loan Fund has more than 600 investors; not one in its 34-year history has experienced a loss), despite the CDFIs having weathered a number of tough economic cycles.
Here’s a list from Opportunity Finance Network, the CDFI industry association, of community investment debt products offered by or for CDFIs.
When performing due diligence for a CDFI investment, AERIS is an independent, third party resource that provides deep financial and mission-impact analyses.
I am curious to hear what issues surface as you advocate for this change, and what evidence foundation board members find persuasive in using their endowment assets as an additional tool for doing good. Please share.
John Hamilton is Vice President of Economic Opportunity at the Community Loan Fund.