Four Things we Learned from Foundation Leaders

December 20, 2023 |
4 minute read
|

Following the release of the Council on Foundations–Commonfund Study of Investment of Endowments for Private and Community Foundations (the “Study”), Commonfund Institute hosted a three-part Coffee Talk Series: Foundation Leaders Discuss.

Commonfund Institute Executive Director, George Suttles, facilitated deep-dive discussions with leaders on the following topics:

Here are four key insights gained throughout the series

1. Speakers confirm a growing trend toward mission-aligned investing.

Following annual data reported in the Study, the numbers of foundations considering investing in a way that aligns more closely with their mission is growing, through ESG integration, impact investing, diverse manager programs, and/or other strategies. Such strategies provide foundations with the ability to remove investments that are contradictory to mission, target investments to further mission-related goals, contribute to redressal of societal inequalities, and more, from their portfolios, all while maintaining fiduciary duty. Speakers throughout the Foundation Leaders Discuss series shared stories of an increasing desire for foundations to either start implementing a strategy, or to progress in their development, and offered that it is a good time to be in this space, compared with years ago when screening was the main option available to these investors. We learned that the trend not only shows that more foundations are doing this work, but that there is a vast opportunity set expansion, in which various strategies are now available to suit different goals and risk preferences, thematic and impact goals, liquidity and stakeholder needs.

2. Investing strategies are on a continuum - starting somewhere is important, so is evolution.

We gleaned from speakers that foundations are on a continuum of mission alignment, from just getting started or seeking easy first steps on one side, to those that have full mission integration into their portfolio on the other. The clearest articulation of this idea was in a discussion of reparative care, in which both Enith Williams and Edgar Villanueva emphasized the importance of understanding and redressing harm, while acknowledging that incremental change is necessary. In other words, there are always steps that can be taken, from education about how historical injustice permeates and constrains today’s economy, to providing non-conditional grants to foundations working directly in communities that have been historically excluded from wealth building opportunities.

Both Margot Brandenberg and Mark Doherty discussed the spectrum of risk and liquidity needs that can be applied to an impact or mission-related investment strategy. For those who want to start with a low-risk category, fixed income and the institution holding your cash are great places to start. Depending on liquidity needs, some might start with mission-related equities (as SFF did) and others, with privates, through the variety of options available, including Black, Indigenous, and people of color (BIPOC) venture managers serving their communities, or investment in affordable housing development. They both emphasized not to let ‘perfect’ be the enemy of the good when moving onto, or along, the mission-alignment spectrum, and that any strategy will be an iterative process.

In the impact conversation, Stacy Caldwell from Tahoe Truckee Foundation described how their foundation started to address climate change by learning about the most pressing issues – including the impact of drought and fires – and went on a journey to understand community needs and how they could be met. They learned that partnering with other foundations can advance local economic development initiatives by attracting public and private capital to provide more permanent funding streams than a traditional grant. In exploring these pathways, both Caldwell and Gripne offered that the best starting place is education, and to not forget you can ‘phone a friend’ – or those leaders of foundations that have learned replicable lessons.

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3. Field building can multiply the efforts of individual foundations.

Education about these expanded set of opportunities, and making those opportunities more available to nonprofit leaders, investment professionals, and donors, is foundational to growing the field of those pursuing mission-aligned investing. This Coffee Talk series, like many Commonfund Institute programs and initiatives, aims to build communities of learning and practice by lifting up lessons learned from thought leaders and practitioners. Several of the series speakers center field building in their work, with varying strategies. For example, Dr. Gripne’s foundation, Impact Finance Center, convenes groups of community foundations to learn from one another, offer more opportunity for “productive collisions,” and understand what leaders’ needs are and how to meet them. Edgar Villanueva serves on numerous boards and investment committees and offers consulting to educate and eventually achieve reparative action in investment management, as does Enith Williams at Reparations Finance Lab.

Toward the end of growing the field of managers and companies that have social goals, Mark Doherty discussed the importance of diverse venture capital managers that invest in communities of color, and Margot Brandenberg at Ford Foundation emphasized the need for philanthropic capital to be a first mover on non-traditional investments, in order to build potential for additional investment (or a virtuous cycle), not only in the U.S. but also in leaders of communities in the global South. Emphasizing putting capital in the hands of those who are impacted by the issues philanthropy seeks to solve by working across investment and program teams was lifted up across conversations. Overall, Brandenburg highlighted that as ambitious as one foundation can be with their assets, it’s only a drop in the bucket of what is needed to address structural inequality and move toward sustainable development goals. In that light, more mission-aligned stewards of capital mean more potential for collective impact.

4. More is needed to achieve that collective impact.

Speakers emphasized the need for more standardized data across the mission-related and impact spectrum, to ease fears of investing in a new strategy, and to make investments that are properly aligned with risk preferences, policy, and fiduciary duties easier for investors. This is a foundational component in shifting capital markets toward a stakeholder-centric economy that many of the speakers and their organizations want to see. Being able to make the business case with sound evidence would also help counter headwinds to diversity, equity and inclusion practices that have arisen in the anti-ESG environment as well as since the US Supreme Court struck down affirmative action in higher education. Educating boards and investment committees on the evidence that already exists (plenty of data shows the benefit of diversity in boards and investment management) and continuing to develop the evidence set across the strategy spectrum discussed throughout these talks, will be important moving forward. Further, boards and investment committees may have to think more creatively, with determination, about how to achieve mission-aligned goals in a more constrained or potentially hostile environment.

With each new year, new societal and investment challenges arise, alongside insights and opportunities to address them. Foundations with endowments hold power to act in service of mission beyond their programs, to shift capital and resources in the economy, and make direct impact. As more and more foundations are grappling with questions of how to do that, our Coffee Talk series lifted up leading voices to share lessons, build capacity and inspire action.

The Institute continues to engage on these issues with leaders and practitioners in the foundation segment and the nonprofit sector more broadly. If you would like to be part of future conversations, please reach out to us by providing your details below.

 

Commonfund Institute

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Commonfund Institute

Disclaimer

Certain information contained herein has been obtained from or is based on third-party sources and, although believed to be reliable, has not been independently verified. Such information is as of the date indicated, if indicated, may not be complete, is subject to change and has not necessarily been updated. No representation or warranty, express or implied, is or will be given by The Common Fund for Nonprofit Organizations, any of its affiliates or any of its or their affiliates, trustees, directors, officers, employees or advisers (collectively referred to herein as “Commonfund”) or any other person as to the accuracy or completeness of the information in any third-party materials. Accordingly, Commonfund shall not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement in, or omission from, such third-party materials, and any such liability is expressly disclaimed.

All rights to the trademarks, copyrights, logos and other intellectual property listed herein belong to their respective owners and the use of such logos hereof does not imply an affiliation with, or endorsement by, the owners of such trademarks, copyrights, logos and other intellectual property.

To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated herein. Forecasts of experts inevitably differ. Views attributed to third-parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Market and investment views of third-parties presented herein do not necessarily reflect the views of Commonfund, any manager retained by Commonfund to manage any investments for Commonfund (each, a “Manager”) or any fund managed by any Commonfund entity (each, a “Fund”). Accordingly, the views presented herein may not be relied upon as an indication of trading intent on behalf of Commonfund, any Manager or any Fund.

Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Fund. Such statements are also not intended as recommendations by any Commonfund entity or any Commonfund employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information or statements. Past performance is not indicative of future results. For more information please refer to Important Disclosures.

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Disclaimer

Certain information contained herein has been obtained from or is based on third-party sources and, although believed to be reliable, has not been independently verified. Such information is as of the date indicated, if indicated, may not be complete, is subject to change and has not necessarily been updated. No representation or warranty, express or implied, is or will be given by The Common Fund for Nonprofit Organizations, any of its affiliates or any of its or their affiliates, trustees, directors, officers, employees or advisers (collectively referred to herein as “Commonfund”) or any other person as to the accuracy or completeness of the information in any third-party materials. Accordingly, Commonfund shall not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement in, or omission from, such third-party materials, and any such liability is expressly disclaimed.

All rights to the trademarks, copyrights, logos and other intellectual property listed herein belong to their respective owners and the use of such logos hereof does not imply an affiliation with, or endorsement by, the owners of such trademarks, copyrights, logos and other intellectual property.

To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated herein. Forecasts of experts inevitably differ. Views attributed to third-parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Market and investment views of third-parties presented herein do not necessarily reflect the views of Commonfund, any manager retained by Commonfund to manage any investments for Commonfund (each, a “Manager”) or any fund managed by any Commonfund entity (each, a “Fund”). Accordingly, the views presented herein may not be relied upon as an indication of trading intent on behalf of Commonfund, any Manager or any Fund.

Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Fund. Such statements are also not intended as recommendations by any Commonfund entity or any Commonfund employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information or statements. Past performance is not indicative of future results. For more information please refer to Important Disclosures.