posted on: Thursday, December 03, 2009

By Kevin Laskowski

More than forty D.C.-area leaders in philanthropy gathered Tuesday to discuss the new book Change Philanthropy: Candid Stories of Foundations Maximizing Results Through Social Justice (Jossey-Bass, 2009). Authored by Alicia Korten Epstein, the book features case studies of foundations and organizations working successfully for change, bringing to life “the real challenges and exhilarations of grantmaking that seeks to address critical social issues of our day.”

Deepak Bhargava, Executive Director of the Center for Community Change (CCC), opened the event to explain why the Center sought to publish the book.

“Real change always comes from expanded democracy,” he said. “Now what is the role of philanthropy in this? The challenge for us is to move beyond charity and give life to democracy.”

He noted the mounting challenges before the sector, including economic instability and inequality and climate change, joking, “Not to put too much pressure on you, but the fate of our society and planet hang in the balance.”

Marjorie Fine, Director of CCC’s Linchpin Campaign and project director for Change Philanthropy, moderated a panel discussion with Korten and representatives from two of the book’s featured philanthropies: Dave Beckwith, Executive Director of the Needmor Fund, and Christine Doby, Program Officer at the Charles Stewart Mott Foundation.

Korten outlined “Six Principles of High Impact Giving,” lessons learned from the more than 200 interviews that resulted in the book:

1. Develop a theory of change.
2. Match your goals to your resources.
3. Use all your resources.
4. Know your potential grantees.
5. Amplify grantee voices.
6. Evaluate work.

She noted how these might be principles for any grantmaker looking to be more effective. However, she said, the case studies in the book featured foundations who brought an additional “equity lens” to their work.

Beckwith related how such a lens lead the Stranahan family, the family behind the Needmor Fund, to fund community organizing and to invest in a socially responsible way.

“I’m from the Needmor Fund and we fund community organizing,” Beckwith said, tracing the development of Needmor’s grantmaking from its beginnings in 1956 through its “two nuns and a fax machine” phase to its current support of local community organizing groups.

“We’d give grants to organizations, and they were basically two nuns and a fax machine,” he said. “We’d give them a grant to raise hell.”

Several events in the 1980s pushed the Stranahans to consider the relationships—and contradictions—between their values, their investments, and their philanthropy. In one instance, The Champion Spark Plug Company, founded by the family, was building a factory in apartheid South Africa, and a shareholder resolution had been introduced to have Champion adopt the Sullivan Principles. The question was raised: how would the foundation vote its shares in the family business?

“What are our responsibilities as owners? How do we apply our values to all of our dollars?” Beckwith asked, saying that foundations need not give up their values or their expectation of return in the realm of investments. “Ninety percent of our assets are screened.”

He pointed grantmakers toward community development financial institutions (CDFIs) as an easy entry point into the world of mission-related and socially responsible investing.

Foundations carry a portion of their assets in cash for a number of reasons, Beckwith explained. Foundations can easily purchase insured certificates of deposit from CDFIs and not only secure a return but do good in communities as well.

Doby noted that her foundation’s practices were rooted in the founder’s vision of community and democracy.

“For Mott, democracy worked best when individuals were related to the community and its institutions, and when institutions were related to individuals,” Doby said.

She explained that community organizing becomes important because policymakers often already know what ought to be done but are “held captive” by other interests.

“The point is to build community voices so that policymakers have the political cover to do the right thing,” she said.

Tuesday’s event was sponsored by the Center for Community Change, Emerging Practitioners in Philanthropy, the National Committee for Responsive Philanthropy, the Greater Washington Social Justice Forum, and the Hill-Snowdon Foundation.

Kevin Laskowski is a Field Associate with the National Committee for Responsive Philanthropy.

posted on: Friday, October 23, 2009

by Julia Craig

More for Mission (M4M) recently conducted a survey to determine the levels at which its members designated assets for mission investing. And there’s great news: the 39 surveyed M4M members reported that foundations currently engaged in mission investing plan to significantly expand their portfolios over the next two years. M4M defines mission investing as including both program-related investments (generally below market rate investments serving a programmatic purpose), and market-rate investments (usually provide market-rate returns as part of a social mission).

At the end of 2008, respondents had 4.7 percent of their assets in mission investments. By the end of 2009, respondents expected to have 6.9 percent of their assets in mission investments, growing to 23 percent by the end of 2011. This would be an impressive almost-four-fold increase in assets for mission investing among respondents over the course of two years!

When asked about their motivation for participating in mission investing, majority of respondents named responsibility and alignment of identity: “Foundations noted that they were essentially motivated by a desire to advance institutional responsibility – that investors have a responsibility to hold institutions accountable for their social and environmental impact. Others noted that they saw mission investing as a way to reflect the values and mission of the foundation rather than contradict them.”

In Criteria for Philanthropy at its Best, the section on commitment calls on grantmakers to invest at least 25 percent of its assets in ways that support its mission. This includes program-related investments, market-rate mission investments, shareholder activism, and other strategies to leverage the massive capital foundations hold in their non-grantmaking coffers.

Kudos to those foundations participating in More for Mission for committing a significant proportion of their assets for mission investing and leading by example.

Do you think mission investing is an effective strategy for foundations seeking to leverage their assets to achieve impact beyond grantmaking? If so, what would spur more foundations to sign on to the M4M campaign? Let us know what you think in the comments.

Julia Craig is research associate at the National Committee for Responsive Philanthropy.

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)

posted on: Monday, March 09, 2009

NCRP’s new Criteria for Philanthropy at Its Best has sparked lively (and sometimes heated) discussions in philanthropic circles since we released it last week.

Criteria is a set of guidelines for grantmakers so they can operate more ethically and increase their impact on the world today.

According to Criteria, a foundation serves the public good by …

Criterion 1: Values
… contributing to a strong, participatory democracy that engages all communities.

a. Provides at least 50 percent of its grant dollars to benefit lower-income communities, communities of color and other marginalized groups

b. Provides at least 25 percent of its grant dollars to advocacy, organizing and civic engagement to promote equity, opportunity and justice in our society

Criterion 2: Effectiveness
… investing in the health, growth and effectiveness of its nonprofits.

a. Provides at least 50 percent of its grant dollars for general operating support

b. Provides at least 50 percent of its grant dollars as multi-year grants

c. Ensures that the time to apply for and report on the grant is commensurate with grant size

Criterion 3: Ethics
… demonstrating accountability and transparency to the public, its grantees and constituents.

a. Maintains an engaged board of at least five people who include among them a diversity of perspectives—including the communities it serves—and who serves without compensation

b. Maintains policies and practices that support ethical behavior

c. Discloses information freely

Criterion 4: Commitment
… engaging a substantial portion of its financial assets in support of its mission.

a. Pays out at last 6 percent of its assets annually in all grants

b. Invests at least 25 percent of its assets in ways that support its mission

You can view the full report, individual chapters, and executive summary for free at http://www.ncrp.org/paib.

Join the conversation—we’d love to hear from you! Tell us what you think about Criteria.

posted on: Monday, November 03, 2008

By Niki Jagpal

On October 10th, the Council on Foundations posted an open letter to its members outlining three recommendations for grantmakers impacted by the global “challenges of our times.” Authored by Ralph Smith, Chair of the Board, and Steve Gunderson, the Council’s President and CEO, the letter acknowledges that “even if fully implemented, these three recommendations do not constitute a sufficient response.” The Nonprofit Quarterly offers excellent insight into the deficiencies of the recommendations and suggests an alternative approach that would help foundations take the right steps towards making their response more sufficient.

Nonprofit Quarterly speaks to many of NCRP’s longstanding core beliefs and underscores the vital role that civil society in the United States must play in supplementing government efforts to address the current global economic crisis. Now is not the time for foundations to pull back funds. Instead, it’s time for them to maximize the impact of their payout requirements, which economic turmoil isn’t going to exempt them from. The nonprofit sector must continue to receive foundation funds if grantmakers want to keep their tax-exempt status.

As noted by the Quarterly, now is the time for increase in overall grantmaking, core support grants, program-related and mission-related investments, support for nonprofit advocacy, and commitment to the nonprofit sector. Now is the time for foundations to acknowledge their reliance on their grantees to carry out their charitable purpose and help the U.S. and the world recover from this global crisis. The Quarterly wants to hear from us all – take a minute to read their excellent letter and join the discussion.

Share your ideas on how foundations can be more responsive to the needs of lower-income and other marginalized communities through support of those nonprofits that serve these groups, especially in tough economic times.

Niki Jagpal is research director of the National Committee for Responsive Philanthropy.

posted on: Wednesday, April 09, 2008

By Meredith Brodbeck, Communications/Development Assistant, NCRP

In Compounding Impact: Mission Investing by US Foundations, the Foundation Strategy Group (FSG) explores three approaches to mission-related investing (MRI), one of which is shareholder advocacy and proxy voting. The report defines this as a foundation using “its investments as a means to engage in shareholder advocacy – through dialogue with corporate management, shareholder resolutions, and proxy voting – to influence a corporation’s behavior on issues relevant to the foundation’s mission.”

Recently, a number of foundation leaders encouraged their peers to exercise shareholder powers during the 2008 proxy season to help ensure that companies act responsibly toward climate change and global warming.

The Investor Network on Climate Risk (INCR) announced the filing of 54 global warming shareholder resolutions with U.S. companies that are facing extensive business impact due to climate change. Furthermore, the number of resolutions is nearly double what it was two years ago, and 14 of the 54 resolutions are already seeing results.

INCR as an organization is also seeing results; their membership has grown from 10 investors managing $600 billion in assets to 60 investors managing $5 trillion in assets.

According to Dave Beckwith of The Needmor Fund, value-based investing can be financially rewarding. “Through careful construction of investment policies and selection of consultants, managers or investment vehicles, it’s possible for foundations to do less harm and more good while growing their financial assets,” Beckwith says in an article for the summer 2007 issue of NCRP’s Responsive Philanthropy.

In analyzing the financial performance of mission-related investments, those done through loans provided the most data due to their popularity. FSG was able to conclude that, “of the 653 loans in our study, 85% were fully repaid.”

Clearly, it is possible for foundations to have a strong investment portfolio that aligns with their mission and values. So why aren’t there more foundations involved in MRI? Is this simply a case of old habits dying hard? Or perhaps foundation trustees are just doubtful? What do you think needs to be done for more foundations (and other organizations) to take the MRI plunge?

posted on: Friday, August 03, 2007

In the past year alone, there have been dozens of news articles and opinion pieces on the topic of aligned investing and foundation investment policies, in both mainstream news outlets and sources focusing on philanthropy and the nonprofit section. As hot as the topic may seem to philanthropoids, many leaders actually doing the heavy lifting in nonprofits across the country may find it too arcane, or simply too far removed from the grant making practices of foundations. They might well think “sure, I support socially responsible investing generally, and I’m glad more foundations are looking at it, but how is that actually going to help the people I serve? To be honest, I’d rather have more grants.”

This is a serious consideration for an organization like NCRP that seeks to encourage more grantmaking to progressive organizations working in social and environmental justice, civil rights and community development, among others. How much energy should a group like NCRP put into advocating for more aligned investing by foundations?

The numbers tell the story. How foundations invest their money may be even more important than grants to low income and minority communities (if not to the grantees that serve them, however.) In 2005, private foundations in the U.S. gave $36.4 billion in grants, but they managed $550.5 billion in investments, according to Foundation Center. Even if they were to take only 5% of those funds into an aligned investment approach, that would be huge change. Further, depending on how aligned investment policies are structured, the majority of those $25 billion or more in funds – roughly 2/3 the total value of foundation grants - could be directed to investment in vitally important infrastructure and economic development in poor communities and threatened environments throughout the U.S. – in things like child care centers, preschools, affordable housing, transportation infrastructure, green development, and the like. In fact, the share of the aligned investment funds going to these causes may be much more than the share they currently receive of grant funds. Imagine what good could come if one of the screens foundations used was a preference for investment in low income areas, akin to what the Community Reinvestment Act sets forth.

Beyond the sheer numbers, several other things make the push for aligned investing a promising strategy to help vulnerable communities, and a smart one for groups like NCRP. First, there is already high momentum within the foundation community for it. Major funders like Ford, MacArthur, Rockefeller and Mott are already pursuing it. Second, unlike efforts to apply new standards to all foundations, most of the impact can come from changing the behavior of a small proportion of foundations – the top 100 foundations alone account for over $225 billion in assets, nearly half the total for all foundations, according to Foundation Center data. Third, this trend could bring some unusual allies into play - investment firms looking to offer aligned investment products may bring their power (and greed) to the debate (strange bedfellows, indeed) become allies of such a push (strange bedfellows), and may offset or overwhelm opponents.

Of course, “God is in the details”, and there are many thorny issues to be worked out. How to do aligned investing, how to measure it’s impact, and in the case of any legal or regulatory requirements, how to define what qualifies as aligned investing are very complex questions. We may not yet be ready to handle billions of dollars flowing in new directions, as Sean Stannard-Stockton cautions. That shouldn’t make us hesitate, though, to push for changes in tax law that might provide incentives to really increase that flow, as Lucy Bernholz, among others, has suggested. The financial markets are very fluid and respond well to demands for service from massive amounts of money – we shouldn’t worry that systems won’t adjust if aligned investing suddenly becomes the norm (wouldn’t that be a good problem to have?). Further, a tax or regulatory change may have the secondary effect, of legitimizing the aligned investing approach, and hand foundation staff some leverage to use in their internal debates with board members. In this way the monetary value of the incentive might be less important, though it must be real, not simply symbolic.

So perhaps the NCRP gloss on promoting aligned investing should be something like this: (1) we want to encourage funders to be as creative as possible in pursuing benefits for the vulnerable people NCRP cares about, (2) a key way we want to do that is by highlighting and praising those who do this well, and (3) tax and regulatory changes can offer important incentives both to reward those who do this well and encourage those who are hesitant. What do we think?

(For an excellent and concise overview of aligned investing strategies and the practical ways they may benefit low income communities, read this paper by Blueprint R+D and Monitor Consulting Group.)

Peter Manzo is an NCRP board member and the Director of Strategic Initiatives for the Advancement Project, a civil rights advocacy organization based in Los Angeles and Washington, D.C. pmanzo@advanceproj.org