impact investing

Impact Investing: Making the Case to Your Trustees

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Several months ago, Exponent Philanthropy and partners Mission Investors Exchange and Arabella Advisors released Essentials of Impact Investing: A Guide for Small-Staffed Foundations. Below is an excerpt from the complimentary and actionable guide, geared to foundations with few or no staff that want to align their investments and missions. 

By David Wood, Initiative for Responsible Investment

The early stages of impact investment adoption for foundations lie at the board level.

The idea to explore impact investment as a philanthropic strategy often comes from a single board member, or from staff or consultants who have seen other foundations adopt impact investing. Board engagement is a critical next step for implementing an impact investing strategy: learning what individual board members think about the possibility, educating the board on the state of the field, and taking a broad survey of potential areas of interest or investment opportunities that engage the board’s imagination.

In most cases, board approval is required for a foundation to engage in impact investing, and that often requires ongoing, high-touch engagement from impact investing champions— whether staff or fellow board members. Early board engagement often involves peer-to-peer presentation from board members who are more familiar with the field—and an allaying of the skepticism of board members who may fear that impact investments may not perform well financially or socially.

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9 Ways to Make a Difference: Strategies From Small-Staffed Foundations

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In our 30-page primer Twenty Ways to Make a Difference: Stories From Small Foundations, author Andy Carroll describes 20 strategies that draw upon the unique assets small-staffed foundations hold. Here are 9 of the 20 strategies—just a sample of the many ways Exponent Philanthropy member foundations are making a difference through their philanthropy. Do any intrigue you? Fit easily into your existing work?

1. Choose a focus. A focus allows funders to accumulate experience, knowledge, and contacts; align activities toward a common goal; spend time working on what is meaningful to them; and better assess progress, make adjustments, stay on track, and see impact. See the post Five Barriers to Focus and Ways to Push Past Them >>

2. Fill important gaps. Funders often keep a watchful eye on needs not met in their communities—a vigilance that springs from a commitment to their hometowns and involvement there as volunteers, parents, employers, and employees. They also accumulate knowledge over time as they review proposals and talk with community agencies. Sometimes they are the first to identify a problem yet unnoticed or to signal the alarm about a trend that threatens to harm, if ignored.

3. Provide emergency loan funds. Some foundations operate revolving loan funds to provide emergency loans to nonprofits. The nonprofits are often waiting for checks to arrive from the government or other sources, and the emergency loans keep critical services available. As program related investments (PRIs), these loan funds are repaid to the foundation so it may make more emergency loans.

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The Risk of Not Taking Risks—and Announcing New Report

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Today, Exponent Philanthropy released Outsized Impact 2015, our annual publication illustrating the power of individual, family, and small-staffed foundation donors. 

The report centers around 7 funder stories that demonstrate characteristics we believe put philanthropy on a path toward outsized impact: passion, connection to community or cause, agility, responsiveness, and willingness to take risks. We will share the stories here in the months to come, or you may download the full Outsized Impact 2015 report now. 

Lisa headshot

Lisa Tessarowicz, CALM Foundation

After graduating from the University of Denver with a degree in international business and finance, Lisa Tessarowicz was working on mastering the science of making corporate money. In fact, she was quite satisfied doing so until a family favor changed her mind. “My aunt runs a women’s day shelter in South Bend, Indiana, and she was getting ready for a big donor event when her database crashed. She’d just lost an employee and asked if I could come out and help. I said, ‘Okay, fine, if I have to.’”

She laughs about her reluctance now, because those 3 months on the shelter’s frontlines changed her life. When her family started the CALM Foundation—an apt acronym of the first letters of each of their names—she threw herself into the work of giving money to local organizations that fostered community attachment and pride.

She loved the giving back part, and she was energized by her business mindset. At her brother’s recommendation, she completed a 9-month course in strategic philanthropy at the Philanthropy Workshop. Lisa took her personal theory of change and her fine-tuned passion back to her home in Colorado Springs, where she had been raised by entrepreneurs. Lisa quickly established herself as an entrepreneur in her own right and, as an impact investor, began providing capital to fund the startups of other entrepreneurs and nonprofits.

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New Guide to Impact Investing for Small-Staffed Foundations

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Pages from Essentials of Impact Investing full layout_v8Exponent Philanthropy, together with partners Mission Investors Exchange and Arabella Advisors, is pleased to announce the release of Essentials of Impact Investing: A Guide for Small-Staffed Foundations.                 

Below is an excerpt from the actionable guide—a Q&A with Luther M. Ragin Jr., former president and chief executive officer of the Global Impact Investing Network (GIIN) who helped accelerate the development of the impact investing industry. He speaks to opportunities for small-staffed foundations that want to invest for impact. 

Q: How does impact investing from small-staffed foundations help create impact? 

A: The same way it would from foundations with large staffs or from other philanthropically minded organizations. But small foundations are unique in two noteworthy areas:

  • Flexibility. Their small size makes for nimble structures that can adapt or respond more readily than larger foundations. This nimbleness leads to clear signals on the part of funders and allows asset managers and social entrepreneurs to make sharp decisions based on these signals. It’s better to get a “no” in a matter of weeks than after a process of several months.
  • Specialized knowledge. Small-staffed foundations have unique understanding and expertise in particular geographic or program areas, or both. This can be leveraged to attract other outside investors who can capitalize on the foundation’s connections to the community.

Q: What are some of the specific strategies leaders in small-staffed foundations can use to play a role in moving capital in markets including or beyond their traditional grant-making activities?

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From Optimism to Action at Recent Nexus Global Youth Summit

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By Sapphira Goradia, Vijay and Marie Goradia Foundation

A few weeks ago, I found myself at the United Nations, in the company of hundreds of millennials intent on changing the world for the better. I was attending the Nexus Global Youth Summit, a gathering now in its fifth year that aims to ‘bridge communities of wealth and social entrepreneurship for dialogue, education, and collaborative problem solving.’

In the short time I’ve worked in philanthropy, I’ve learned that it is possible to spend 100% of your time attending conferences, summits, and events, leaving little time for the actual work of running a foundation. For me, every event I attend has to either provide an educational experience that I couldn’t get online, or offer a worthwhile networking opportunity. Nexus fulfilled both these requirements.

The Nexus Global Summit brings together social entrepreneurs, nonprofit leaders, investors, and philanthropists with a passion for a wide range of issues—everything from the discrete sciences to human trafficking. Putting all these interests in a room together can be overwhelming, so the Nexus team opens an online portal to participants a few weeks before the event. The portal allows participants to upload their bios, specify interest areas, and connect with others before, during, and after the summit. I had written in my profile that I was interested in impact investing, so was included in an impact investing sub-group on the site, where participants shared useful materials and updates.

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5 Fundamentals Foundations May Overlook

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By Lauren Kotkin, Exponent Philanthropy

Mary Phillips of GMA Foundations at February's Foundations 101 Seminar

Mary Phillips of GMA Foundations at February’s Foundations 101 Seminar

Foundation trustees gathered last month for our daylong Foundations 101 Seminar, co-hosted by Southeastern Council of Foundations and led by colleague Mary Phillips of GMA Foundations, an Exponent Philanthropy Professional level Sustaining Partner, with support from U.S. Trust philanthropic advisor Mary Stokes and attorney Marc Lane.

More than a few points stood out as essentials that can be easily overshadowed or overlooked as funders go about the complex work of giving well.

Know where your founding documents are and what they say

A nonprofit’s articles of incorporation and bylaws, or a trust’s trust instrument, are legal documents that outline how a foundation will be governed. 

What ought to be in an organization’s bylaws

“The founding documents are the board’s blueprints for building the foundation,” says Mary. “These documents should be part of each board member’s orientation and a chapter in the foundation’s operating handbook. Trustees should be as familiar with the founding documents as they are with their own backgrounds.”

Trustees have a duty to understand what the documents contain and what they mean; staff members will also find them helpful in their work. Yet far too often, they are filed away and forgotten. In our recent survey of member foundations, 7% were unsure whether they represented a nonprofit corporation or a trust—a telling statistic. 

If faced with a governance question or quandary, consult your founding documents first. Guidelines on minimum number of board meetings, board member term limits, voting policies, and much more are often addressed in your founding documents. If your board amends its bylaws, be sure to notify the IRS when filing your annual tax return.

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Three Actions I Believe Any Philanthropist Should Consider

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By Stephen Alexander, Exponent Philanthropy

Last month, a poignant statement from my colleague’s essay firmly planted itself in my subconscious: “Vaclav Havel’s message is a powerful yet intimate one, calling each of us to pretend no longer, and to summon the courage to step out, speak out, and live in truth.”

Powerful, isn’t it? This week, as the call shifted to the forefront of my mind, I realized just how powerful this statement really is, and how important it is that we, as philanthropists and as a nation, help each other step out from behind the curtain, speak out against fragmentation and decay, and speak up for the rights, values, and ideals that make our country a land of opportunity.

The call brings to mind three actions that I believe any philanthropist—or citizen—should consider.

1. Model the behavior we want to see. As we know, an active, engaged, and educated civic society is a key component of any prosperous, modern democracy. Thankfully, many funders are leveraging their unique positions to be the bridge-builders we so desperately need to tackle the awesome challenges we are facing and will face in years to come. These funders, many of whom are system leaders, almost always start with listening. They employ core competencies: seeing the larger system, fostering reflection, and shifting from reaction to co-creation.

Read more about system leaders (Stanford Social Innovation Review) 

Whether they recognize it or not, bridge-builders, system leaders, and other change-makers model the behavior they want to see every day. For inspiration, look no further than Kelly Ryan, CEO of Incourage Foundation. Kelly and her colleagues have made a participatory culture their top priority, and their community has taken bold steps to own its collective future, about which Kelly has written on her blog.

2. Lift up leaders with strong moral compasses. These days, it can feel like far too many leaders let capital gains or personal profits guide their actions. Luckily, philanthropists have the ability to develop, encourage, and lift up leaders committed to the well-being of people and communities nationwide. 

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All In for Impact Investing

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This post, originally titled “New Belgium Family Foundation: ‘All In’ for Impact Investing,” first appeared on the blog of First Affirmative Financial Network, a firm that has specialized since 1988 in aligning clients’ investment portfolios with their values. It is reposted here with permission.

By Meaghan Scott, First Affirmative Financial Network

The New Belgium Family Foundation [an Exponent Philanthropy member] was started by the CEO and co-founder of the New Belgium Brewing Company after the company became 100% employee owned through an Employee Stock Ownership Plan (ESOP) in 2012. The sale to the ESOP is only the most recent example in a long history of practices by New Belgium Brewing that promote environmental stewardship and social responsibility, including being one of the early Certified B Corps. The foundation, which is run by the family independent from the brewery business, seeks to honor that positive momentum. The foundation is working toward becoming 100% mission aligned.

The decision to align the foundation’s investment portfolio with the organization’s mission for positive impact was an easy one. To the New Belgium Family Foundation, investing in any other way would not align with the values and mission of the foundation. Once the decision was made to invest the foundation’s assets in a sustainable, responsible, impactful manner, Executive Director Lucy Cantwell led a search to find an investment firm that could serve the foundation’s needs.

The search for an investment firm was not easy! After eliminating several large banks during an extensive Request for Proposal (RFP) process, Lucy and the board decided on a smaller investment firm that had the flexibility and mission-related investing experience to truly meet their needs. Her advice to other foundations is to take things slowly and spend time deciding who will best fulfill the foundation’s interests. Further, she suggests that you make sure that you know your own goals as well as the person or firm you are hiring to be your investment advisor, because you will need to articulate clearly what you’re looking for, as well as rely on his or her judgment and ability to help teach you when difficult situations arise.

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White House “Insider” Inspirational – Changes Are Coming to Philanthropy

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By Floyd Keene, Triple EEE Foundation

Recently I attended a special reception at Exponent Philanthropy headquarters. In attendance were fellow board members, D.C. area foundation leaders, corporate partners, and a special guest from the White House: Jonathan Greenblatt, Special Assistant to the President and Director of the Office of Social Innovation and Civic Participation in the Domestic Policy Council. As Director, Jonathan leads the Office’s efforts to use human and financial capital to bring attention to community solutions.

Jonathan was kind enough to join us even though he had a very busy day. At a White House conference that day, the administration announced a number of actions to stimulate impact investing, including $1.5B in commitments from a group of dedicated private and philanthropic entities.

At the reception, Jonathan described the conference and President Obama’s views on philanthropy and public/private partnerships. My fellow board members told me that I beamed during Jonathan’s entire presentation. I cannot disagree. Never before had I heard a speaker talk about conceptual topics, where I felt like he was plucking them directly out of the beliefs of my heart and the depths of my soul. At the conference, and in the press, the Obama administration indicated the following, with my reactions stated in italics:

1. President Obama’s new stress on philanthropic initiatives was inspired by a site visit to the B.A.M. (Becoming a Man) program run by Youth Guidance in Chicago. The visit helped spawn My Brother’s Keeper, a far-reaching Presidential initiative announced in February. 

Whenever I hear this story, I almost have trouble keeping it together. My foundation has long supported Youth Guidance, which began B.A.M. as a small pilot program several years ago. To now see it inspire an entire Presidential initiative is indescribably moving.

2. The Obama administration believes that governments and philanthropists alone cannot solve social problems. Rather, the private sector must be a key player in addressing social concerns.

This thought—almost an irrefutable reality—is rapidly becoming the mainstream view. It implies a changed world of philanthropy not considered possible 10 years ago. Jonathan’s words reminded me of a belief I have held for years: World hunger will not be solved by a big food drive. It will be solved by one brilliant entrepreneur, who figures out how to make money by solving world hunger. 

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The Pulse: Boost for Impact Investing, Economic Effects of Climate Change

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By Andy Carroll, Exponent Philanthropy

I regularly explore trends influencing philanthropy by spotlighting articles, reports, and essays in the media. I cast a wide net, venturing beyond philanthropy and traditional topics to consider a variety of ideas, innovations, debates, and critiques. Read previous posts in the series  

How Scarcity of Time Locks the Poor Into Cycles of Hardship

Citing recent studies of time scarcity, a writer in the New York Times describes how the daily struggles by low-income people to meet basic and immediate needs consumes all their available time and mental capacity, undermining their ability to make better decisions, perform effectively, and plan ways to improve their income and opportunities. “Attention is finite,” she observes. “The poor are under a deadline that never lifts, pressure that can’t be relieved. If I am poor, I work or I churn until decisions like buying lottery tickets begin to seem like attractive alternatives.” She advocates simplifying sign-up processes for government programs and offering immediate and easy ways for people to save money.

Powerful Innovations Can Be Simple Ones

Anti-hunger advocate Bill Shore profiles one technique for alleviating time pressure on low-income people. In the Chronicle of Philanthropy, Shore explains how the new “community eligibility” provisions, passed by Congress in 2010, will eliminate “school meal applications and fees in high-poverty neighborhoods, reducing administrative burdens for schools and families and stigma for children.” The change will likely add thousands more kids to the federal School Breakfast Program. Says Shore, “Innovation does not necessarily require innovation labs, expensive consultants, new technology, and the other things popularly associated with it. Instead, it may mean a small common-sense tweak that is far enough upstream to change the entire trajectory of a program.”

Impact Investing Enters the Big Time

Impact investing got a huge push from a coordinated effort by the White House and several large foundations to commit a collective $1.5 billion, and from a new report that offers policy recommendations to nurture more such investing. The new investments will support affordable housing, clean energy, quality education, workforce development, and work in other fields. The report by the U.S. National Advisory Board on Impact Investing offers recommendations to remove regulatory barriers, develop next-generation financial instruments and models, and provide incentives for new private impact investment.

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