Building a Strong Foundation: Merging Mission & Money(A)

If you work with a foundation or are the recipient of a foundation grant, you’ve seen first-hand the power of strategic grantmaking. And as a social investor, you’ve likewise seen the change-making impact of socially targeted investments and shareholder advocacy.
But did you know that to date, most philanthropic foundations have not used these two strategies in tandem? Historically, there’s been a wall between how foundations work to achieve their missions through giving grants, and how they manage their assets. The number of foundations that include social guidelines in their investment policies remains small, and even proxy voting is too often overlooked. According to a recent Council on Foundations survey, 46% of foundations automatically vote their proxies with corporate management, while only 10% of those not automatically voting with management have written proxy voting guidelines in place. Given that foundations use roughly 5% of their assets for grantmaking each year, the bulk of most foundation endowments is doing little to advance their stated social missions.
The good news is that the wall between mission and investments is beginning to break down, with more foundations actively aligning their investments with their missions. According to the Council on Foundations, 18% of foundations now screen their investments on one or more social issues; at Trillium Asset Management, 100% of our foundation clients do. Foundations large and small are now actively engaging in shareholder advocacy initiatives. Prominent foundations such as Ford, Jesse Smith Noyes, Nathan Cummings, Needmor, Rose, and the Boston Foundation are leading the foundation community in embracing the concept of what’s increasingly known as “mission-related investing.” These foundations are leveraging the power of their asset base through relatively simple steps like voting proxies, and in more involved ways, such as filing shareholder resolutions and providing loans through targeted community investment vehicles.
The great news is the untapped potential of foundations – 62,000 of them, with a total $477 billion in assets – to use mission-related investing to impact a wide range of corporate governance, executive pay, environmental, social and economic justice issues. At Trillium Asset Management, we have a strong commitment to helping foundations realize this potential. We work closely with our foundation clients to develop customized mission-related investment strategies, including policies for shareholder advocacy, proxy voting, community investment and portfolio screening. All of our foundation clients invest in accordance with mission, and some are quite active. These entities include the Granary Foundation, which supports the Center for Rural Affairs in developing economically just and environmentally sound rural communities, and whose investments avoid agricultural chemicals and commercial biotechnology; and the health-focused Whitney Foundation, which screens its investments for for-profit healthcare (out) and safe working conditions (in), and is using its shares in a major drug company to co-file a resolution on HIV-AIDS. If you work with a foundation considering mission-related investing, Trillium Asset Management can be a valuable resource in developing and implementing high impact mission-related investment strategies.
There are strong arguments that aligning mission and investing is not just an option, but a fiduciary duty for institutional investors and particularly for mission-guided entities like foundations. Regardless, it is hard to argue that mission-related investing is an option foundations should not seriously consider. On a basic level, it creates consistency between a foundation’s investments and the guiding social mission of its grantmaking. More importantly, mission-related investing provides a set of tools, to date largely underutilized, that can enhance programmatic effectiveness and ultimately increase a foundation’s value as a change-making entity.