(Editors Note: NCFP is pleased to repost this blog from the Nathan Cummings Foundation. The original post can be found here.)
The Nathan Cummings Foundation is focused on creating a more just, vibrant, sustainable and democratic society, and to finding solutions to the two most challenging problems of our time – the climate crisis and growing inequality. These intractable problems can’t be solved by grantmaking alone. Capital markets have to change to drive sustainable and inclusive growth that will create long-term value for people, the planet and the economy. How we invest our assets and use our influence as investors are powerful tools to make that change happen. And that is why today, we’re announcing our decision to fully leverage the strength of our nearly half-billion dollar endowment to mission-aligned investing, so that every dollar works to further our mission.
Our decision to go all-in on impact investing reflects our values and our aspirations, our assessment of the market, and the opportunity for NCF to both join and inspire a chorus of philanthropic and private sector leaders changing the landscape for investing and the business model of philanthropy. Times like these require visionary thinking and bold action, and we are committed to using all of our resources – our investments, our grants and our voice – to make a difference in the world. We believe this is our responsibility and the future of philanthropy.
Realizing the Power of Full Alignment
Harnessing the full potential of our assets, alongside our grantmaking and our engagement with companies as an active owner, will remove barriers in the market, further our mission and accelerate the work of our partners. We’re already realizing the potential of this alignment and approach to our work.
Dismantling Inequality: The average chief executive officer earns roughly 347 times more than the average worker in their company, so we use our influence as an investor to advocate against egregious executive compensation practices that contribute to income inequality. Our partner Just Capital ranks companies on worker treatment, including compensation practices, pay equity and discrimination. Their top 100 ranked companies pay their workers more and outperform their competitors: Over the past five years, they delivered a 24 percent average return on earnings, significantly higher than 16 percent for other ranked companies. Our partners at the National Domestic Workers Alliance, Restaurant Opportunities Centers United and Fight for $15 are implementing worker protections, organizing, mobilizing and making workers visible in the fight for pay equity and fair treatment across multiple industries, creating an even greater impact on income inequality over the long-term.
Building an Inclusive Clean Economy:
Companies across a range of industries face climate related risks to their business. Through our shareholder activism and grantmaking, we push companies to track and report on their emissions and take steps to reduce them. Last year, in partnership with Wespath, Ceres and the 50/50 Climate Project, we pushed Occidental Petroleum to take an in-depth look at its efforts to address climate change, and ultimately, to commit to phasing out routine gas flaring and link a portion of senior executive compensation to progress on carbon capture and sequestration. Our partners at Ceres are documenting the business case for clean energy use: According to their research, the largest companies in the United States are increasing their clean energy use, improving efficiency, enhancing their value and decarbonizing the U.S. economy. Our partners at the Climate Justice Alliance, the Solutions Project and NY Renews are working to make sure that the clean energy transition delivers economic benefits for all. And we are mobilizing capital across asset classes with investments in funds that finance renewable energy projects, create jobs and reduce greenhouse gas emissions, all while providing a market-rate return.
Learning from Our Journey
When I joined the organization just more than two years ago, NCF was already a leader in active ownership strategies and had made a commitment to impact investing. In 2013, our Board established the Assets Aligned for Impact Committee and carved out $6.5 million for impact investing from our endowment. We began discussing what it would take to move from a pilot to a long-term strategy that would meet and match our overall ambition and the goals of our mission. We decided to invest in a thoughtful learning and decision-making process across the Board and the Investment Committee.
Our Board is very comfortable telling the story of how we moved through this process and what we learned along the way. We started with a wide variety of views on the market. Getting to consensus meant challenging our assumptions and building a shared understanding about the future of the market, a more comprehensive view of returns and our role as agents of change. We worked through frequently heard questions – Is there enough deal flow? How do you measure impact? Can you do good while making the returns that you need to fuel your grantmaking and to exist into perpetuity?
To move forward, we turned to our colleagues and the rich network of resources for impact investors. We appointed Lisa Green-Hall to our Investment Committee and Rey Ramsey to our Board, two leaders with decades of experience in impact investment. We brought in new advisors such as Sonen Capital, who helped guide our learning on the strategic role of impact investing. Under the leadership of NCF Trustee and Assets Aligned for Investing Committee Chair James Cummings and our Investment Committee Chair John Levy, we began joining the two committees together to make sure they were learning together and informing our strategy. We reviewed market trends and case studies. We spent time listening to the experiences of foundation colleagues such as the Rockefeller Brothers Fund, McKnight Foundation and the Ford Foundation. And we joined networks like Confluence Philanthropy, Mission Investors Exchange, the Social Venture Network and the U.S. Impact Investing Alliance President’s Council. After nine months of work with our partners and our outsourced Chief Investment Officer, Global Endowment Management, our Board unanimously decided to go all-in on impact investing.
At the heart of our decision is our culture. We held close in our minds something that our founder, Nathan Cummings, said: “Nothing will ever be attempted if all possible objections must first be overcome.” We do not have all the answers and we know we will learn by doing. We started where many foundations do, by evaluating the investments we currently own for alignment. In the coming months, we will be developing a new investment policy statement, benchmarks for progress and a timeline for full implementation. We will invest in companies and strategies across all asset classes to achieve a market rate of return, and will turn to program related investing next. Over the course of the next year, we will share more about our journey and next steps.
At this stage, we’ve made a transformational decision that we know will change the trajectory of our work, now and in the future. Foundations have trillions in assets, but are too often only using a small fraction to support our missions via grantmaking. We’re proud to be part of the growing number of foundations that are activating the power of our endowments to achieve the future we want.