The process of integrating investments and values is often described as a journey. It’s an undertaking that begins with exploration as stakeholders define what investing for impact means and begin to map out a plan of action. Plans may tilt portfolios toward companies with exemplary environmental, social, or governance factors (ESG integration); exclude industries or companies deemed objectionable, referenced as divesting; or emphasize thematic issues, such as women in leadership or climate change.
Whereas each journey starts on a distinct path, all share the same goal: the alignment of values with investments.
Growing availability of data demonstrates investors can generate competitive returns. Established to manage the charitable assets of our founders in perpetuity, we have a history of partnering with clients to define and build strategies to advance their vision toward a sustainable future.
Guiding a Private Foundation: Aligning Trustees Around a Mission
Foundations are likely to become engaged in the impact investing journey through the anecdotes and testaments shared at conferences like the Mission Investors Exchange. As an example, a recent foundation conference featured representatives from the Case, Kresge, and MacArthur Foundations, with Darren Walker, president of the Ford Foundation, declaring that foundations must change the way they think about philanthropy and urging participants to align their mission with their investments.
The trustees of one private foundation, although prepared to heed Darren Walker’s rallying cry, struggled to answer questions like: What does impact mean? How will returns be affected? Do we start with public or private investments? A multitude of diverging opinions emerged, leading to heated and unresolved debate.
As advisor to the trustees and a participant in the discussions, Glenmede broke the impasse by introducing an uncomplicated yet significant suggestion: We advised the trustees to approach impact investing in slow, methodical increments, investing only 5-10 percent of the assets in year one and increasing the impact at the same pace over the next two years. At the conclusion of third year, we agreed to revisit and re-evaluate the strategy.
We also advised the trustees to begin diversifying by investing in publicly traded securities, a departure from conventional wisdom favoring overweighting private investments. By removing the multiyear commitment inherent in illiquid private investments, the trustees felt confident embarking on a new values-aligned investment plan.
The Future Depends On It
The impact investing journey can be as rewarding as it can seem daunting. In our experience working with school boards, foundation trustees, and multigenerational families, we’ve seen the wide-ranging challenges decision makers face. An ever-growing body of data is on hand to support investors who want to transform their ideological convictions into objective, return-producing investment strategies. We believe clients should proceed at their own pace, approaching impact investing with thoughtful deliberation, prudence, and care. After all, future generations depend on our success.