The National Forum on Family Philanthropy is right around the corner. As our team prepares for two sessions on Impact and Mission-related Investing (see schedule here) – we took a moment to interview panelist and speaker Stephanie Cohn-Rupp, for some brief insight on Impact investing.

Stephanie is Threshold Group’s Managing Director of Impact Investing and works with individuals and family foundations to re-imagine their investment strategy and translate their values in action. Impact investing is about being intentional and investing with insight. For many, it is about aligning your values and goals with your philanthropic mission. Below is a preview of some of the themes that Stephanie will explore during the sessions titled: Impact Investing and Generational Differences in Family Foundations on Wednesday, October 18th and Mission Investing: A Deep Dive into Current Strategies for Aligning Investments with Mission on Thursday, October 19th.

To see the current lineup of speakers and topics or to add your name to the National Forum waiting list, please go here.


 

1. Why are more family foundations committing a significant share of their assets to impact investing?

We are seeing more family foundations committing their assets (both endowment and “payout”) to impact investing, regardless of asset size. The reasons are multiple and depend on the family, but we are starting to notice some trends.

First, we find that multi-generation families are being increasingly influenced by Millennials who are now working and are actively investing adults – who wish to align their endowment with their values.

The second trend we notice is that asset owners are sharing best practices more and more – through NCFP, through Confluence, Toniic, Mission Investors Exchange and other networks. Talking about your portfolio in public is no longer a taboo – and families already doing impact investing are readily sharing their experiences with other families. In some cases, like with KL Felicitas Foundation (a family foundation), the portfolios are completely shared publicly online and that has encouraged other foundations to do the same. These foundations are showing that it is completely feasible to avoid the “cognitive dissonance” that occurs when a foundation attempts to further its mission with only 5% of its assets and does not “activate” the lion share 95%.

A third and very important factor is that investment advisors and fund managers have more sustainable and values-aligned investment products to offer their clients – which are not concessionary. Fiduciaries and trustees of these foundations have realized that an endowment can be mission aligned without having to necessarily give up on your financial goals, including if your goal is growth in perpetuity.

And lastly, I believe that the mega-trends such as climate change and increased wealth disparity are such that families are looking to leverage all their assets: financial, human and intellectual to try to address the and promote the systemic changes we are facing.

We still have a long way to go to ensure that most family foundation endowments are values-aligned with their respective missions. We need more advisors to offer these services, and more trustees to get on board – as anxiety around financial returns still is the reality for many foundation trustees. Slowly but surely, this is changing.

 2. Have you seen multiple generations get involved in impact investing?

We have indeed seen multiple generations get involved in impact investing, by providing official roles and greater responsibility to younger generations. An example of this is to place the second or third generations as members of the finance committee, or to include them as part of the committees interviewing and selecting new investment advisors. The more the responsibility is transferred, the greater the engagement tends to be.

3. Can impact investing support a foundation’s philanthropic work?

We believe that we can absolutely have an endowment not only “do no harm” but even further reinforce the philanthropic work of the grantmaking team. This is a story of breaking down barriers between grant-making teams and investment teams: in the end, this is a human capital story. Those in charge of grant making and programs need to be willing to collaborate with the “investment people” and learn a new professional language. Simultaneously, the investment team or finance committee need to be willing to embrace the language and even the goals of the “programmatic team.” This cross-pollination of knowledge and experience can yield a much more coherent investment approach which can come much closer to the original mission of the foundation. This requires patience and vulnerability as each professional is entering new territory. The Russell Family Foundation’s portfolio and Mission Related Investment Committee (MRIC) is an example of this, where both investment team and programmatic teams discuss and conduct due diligence on investments together. One thing to avoid, however, would be self-dealing - where foundations might consider grant-making and investing in the same organization.

4. What is the best way for a family to get started in impact investing?

We always recommend connecting with other families and foundations to get started. Peer-to-peer learning is a very safe and powerful way to learn about how others have succeeded or failed in integrating their mission in their investment policy statement. However, foundations need to be judicious about who they approach, as anecdotal evidence is important but insufficient to take action.

It is also important to speak to advisors and consultants who can help you think through how to get started and what approach (starting potentially with a carve-out for example) is best suited for your institution and your comfort level.  For this, we often recommend speaking to multiple firms and seeing which type of advisor is best suited for you. For more information on choosing your impact investing advisor, please refer to our chapter “Choosing Your Impact Advisor” in The ImpactAssets Handbook For Investors published by Anthem Press and edited by Jed Emerson.

5. Any other “lessons learned” that you could share?

The main lesson learned, having watched many organizations and individuals begin the process of aligning their assets with their values, is to start simply by examining what you currently own. It is important to assess the negative and positive impact of your current portfolio before making any changes or big decisions. You might realize that you can keep the managers you hold in your portfolio, and apply negative or positive screens. Or you might realize that you are holding companies which go against your value-system and need to take action immediately but cannot through your current advisor. You might also realize that a large portion of your assets are illiquid, and you cannot make a change right now – so it’s important to establish a plan for implementation next year. The basic point is to start by knowing what you own and then talking and meeting with people who have experience doing this – as an asset owner, trustee or advisor. You’ll be surprised how friendly and open this community is to welcome new entrants! 

Stephanie Cohn Rupp is an associate of Threshold Group, a registered investment adviser.  Ms. Cohn Rupp’s responses are not intended to be and should not be construed as investment advice.