CASE STUDY 1 - Friends Provident Foundation

INCREASING THE FLOW OF CAPITAL FOR GOOD - INVESTING AND GIVING

Magazine article

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 .’

http://www.mistra.org/