posted on: Friday, April 10, 2009

By Meredith Brodbeck

The Rockefeller Philanthropy Advisors and the As You Sow Foundation have released a new report titled Proxy Preview 2009, which is “designed to help foundations navigate these [shareholder] proposals and identify those that are relevant to their mission and grantmaking agendas.” For many foundations proxy voting is left to financial or investment managers; Proxy Preview 2009 concludes that as a result, foundations are often making investments that conflict with their own missions.

Similar issues about proxy voting and mission investing are echoed in NCRP’s Criteria for Philanthropy at Its Best. As part of our Commitment criterion, NCRP states that a grantmaker practicing Philanthropy at Its Best invests at least 25 percent of its assets in ways that support its mission, which include the following:

· Screens: Screening traditional investments for social or environmental factors can help a foundation seek corporations whose practices do not conflict with its mission. Screens can be either positive or negative; that is, a screen either can seek out a certain trait such as paying employees a living wage or it can avoid a certain trait such as companies that produce tobacco products.

· Shareholder advocacy: Foundations can leverage stock portfolios to introduce shareholder resolutions and to vote proxies. Foundations also can involve their grantees when appropriate to improve corporate practices.

· Proactive mission investing: Proactively seeking out investment opportunities that advance a foundation’s mission such as investing in affordable housing and providing direct loans to nonprofit organizations.

In Compounding Impact: Mission Investing by U.S. Foundations, FSG Social Impact Advisors discovered that only 2.6 percent of foundations assets were used for mission investments[1]. This figure and the modest amount of mission investing currently done are greatly due to concerns about financial responsibility and/or lack of motivation.

Criteria explains that grantmakers can work to identify mission investment opportunities in various ways. They can increase board-level understanding of these three strategies; include investment and program staff in the process; involve grantees in shareholder activism; and enlist experts like mission investment intermediaries. Doing so allows mission investing to become part of a grantmaker’s financial investment strategy and can prove to be beneficial for the funder. Such investments not only show a foundation’s commitment to using tax-exempt dollars for charitable purposes, but also demonstrate it leveraging its private sector power to broaden the impact of its community contributions. Foundations can also leverage their tremendous assets in non-financial ways that support their missions by, e.g. moving their offices to blighted communities, showing real commitment to those underserved populations.

The report maintains, “Studies show the results of shareholder resolutions and engaged proxy voting: honest and reasonable compensated corporate management, socially responsible corporations and independent boards of directors lead to stronger financial returns.”

Is it important to you that a grantmaker demonstrate its commitment to using tax-exempt dollars for charitable purposes and why?

[1] Sarah Cooch and Mark Kramer. Compounding Impact: Mission Investing by U.S. Foundations (Boston: FSG Social Impact Advisors, March 2007)