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At the Tipping Point for Mission Investing: What Now?

At the Tipping Point for Mission Investing: What Now?

September 9, 2015

I officially declare that mission investing among foundations and family offices is at a tipping point. The number of early adopters has reached a critical mass, providing enough results and pulling enough products and services into the market to tempt mainstream audiences to take a serious look. Bingo! Hold onto your hats, because it looks like the mission investing sector will be very, very busy in the next few years.

Mission investing is everywhere — it comes up at conferences, in board rooms and at professional meetings. New funds and managers are introduced every week, with products such as “public equities through a gender lens” or a “low-carbon equities index.” Existing fund managers are bringing on specialized mission investing expertise, such as Goldman Sachs’ recent acquisition of Imprint Capital. Others establish partnerships to help them provide metrics and services, like the new impact investing benchmark Cambridge Associates produced in collaboration with Global Impact Investors Network (GIIN).

One thing that would be really helpful is for all of us to mean the same thing when we say mission investing. Here at Philanthropy Northwest, this term means impact investing by foundations and family offices. We mean philanthropic organizations investing in line with their values, in any public or private asset class, whether the work is claimed as a grant or is made as a traditional investment. The full menu of options starts with public equity vehicles and extends to highly-mission-targeted private investments, some of them PRIs. And don’t forget non-investing activities such as voting your corporate shares and making grants aimed at creating new investment opportunities.

Calculated Risks

With these broad possibilities on the table, and with more foundations looking at mission investing in the near future, trustees around the country are rightfully feeling the pangs of fiduciary duty. We are talking about the endowment, after all. Nothing is more fiduciary than that. And since when did mission creep into investment oversight, and when did the program side of the foundation start informing the investment strategy? It’s enough to give a trustee a headache.

No wonder it took special people tagged as “early adopters” to get to this point. Early adopters are said to be experimenters, working from the gut and trusting emotions. They get a bum rap for being reckless, but I don’t think that’s accurate. The early foundations that adopted mission investing, such as Jesse Smith Noyes, F.B. Heron, and Meyer Memorial Trust, calculated risks carefully. They showed a high tolerance for working with unknowns — but that is not the same as betting the farm.

Thanks to early adopters, a good amount of investing data now exists. For instance, trustees considering mission investing today can actually consider modeled portfolios, reducing some of the key financial unknowns that faced the first foundations who mission-invested. At The Giving Practice, we have worked with Veris Wealth Partners to generate models that allow trustees to consider both the financial and impact returns that mission investing might generate.

Those of us working in the field need to heed the more data-driven, “show me” imperative that will dominate the coming stage of mission investing. It just makes sense for foundation trustees to verify that mission investing will make their philanthropy more effective over the long run. That evidence is out there now, compelling more foundations to take up mission investing, in turn pulling more and more products and services —and data —into the sector.

At the same time, new groups of foundations will sow the seeds as early adopters for even more new mission investing approaches. Their efforts will expand the menu of acceptable products, as they weed out what works and test market structures that truly support their values.

Bingo!

Based in Missoula, Montana, Rosalie Sheehy Cates is a senior advisor for mission investing services at The Giving Practice, Philanthropy Northwest's consulting team.