INCREASING THE FLOW OF CAPITAL FOR GOOD - INVESTING AND GIVING
Having decided it was “more important to invest positively than to focus on the negative,” in 2007, Friends Provident Foundation made its first impact investment, a £250,000 subordinated loan to Charity Bank Limited. While still keeping 95% of its assets in traditional SRI equity and fixed income funds (which apply positive and negative screening alongside company engagement), the foundation now also aims to devote 5% of its endowment capital to direct investments for impact.
The foundation works with a specialist advisor to help screen for impact investments appropriate to its mission. Foundation director Danielle Walker Palmour observes: “It’s given us an excellent idea of what’s out there”. Currently, Friends Provident Foundation has other impact investments with an ethical property company, a community development bank, and the Social Impact Partnership, a social enterprise that works with prisoners to reduce recidivism.
Impact investing has also enhanced the capacity of the foundation and added a new dynamic to its management. “Trustees are interested in what investees have done. They want to know how things are going in general, not just if they have paid our loan back,” says Danielle Walker Palmour. Actively participating in the UK impact investment community has also opened up the foundation to the outside. “We’re talking to people we would never have met otherwise,” she says.
Next year, the foundation will introduce consistent metrics for comparing opportunities side by side and against the mission. “It’s critical to stay tightly focused on the mission,” says Danielle Walker Palmour, “rather than spreading ourselves thinly, we ideally look for impact investments that leverage our existing expertise and contribute in some way to financial inclusion or our other charitable objectives”. The foundation is also considering collaborating with other impact investors to jointly evaluate multiple potential investments at a time.
Recommendations to other foundations:
• Engage your board in actively shaping the SRI / impact investment strategy and linking it to the general mission of the foundation.
• Clarify your impact investing goals. Know what types of enterprises you want to support and how they connect to your mission.
• Look for impact investments that leverage your existing expertise. Push managers to develop new impact investment solutions that fit with your mission. Consider collaborating with other impact investors to share resources and reduce costs.
• Find a good external advisor who can accompany you through the process of developing your investment strategy.
• Participate in dialogue and thought-leadership around your investment activities. It will strengthen your foundation by exposing you to new ideas and generating opportunities to advance your mission.
This is an abridged version of an article that appears in a new report from Mistra ‘360-degrees for Mission - How leading European foundations use their investments to support their mission and the greater good .’