Social Impact Investing

Foundations
Like high net worth individuals, foundations often
have the latitude to take a more specialised
and tailored approach to Impact Investment.
They can invest their endowment in Financial
First investments (sometimes known as “Mission-Related
Investment”) then use a portion
of their grant allocations or assets to invest
in Impact First Investments (often referred
to as “Social Investment” and sometimes as
“Programme-Related Investment” from their
designation in the US tax code). Given the
breadth of opportunities available in the market,
many foundations have started to invest in
Impact First funds. Like high net worth individuals
and family offices, foundations can often
achieve strong returns, while creating impact
not just broadly, but in specific target missions
that relate to the foundation’s own mission.
Like high net worth individuals,
foundations often have
the latitude to take a more
specialised and tailored approach
to Impact Investment.
Entry Points May Vary
The wide range of available Impact Investment
opportunities can be daunting for someone new
to the space. According to John Goldstein of
Imprint Capital, “The flexibility to invest across
asset classes, impact areas, and return profiles
possessed by some high net worth investors is
both a blessing and a curse. This ability to play
across the whole spectrum can be paralysing,
leaving some thinking ‘Where do I start?’ Finding
clear anchors and entry points is essential.”
When the Kellogg Foundation chose to embark
on this strategy, they set aside $100MM
of the foundation’s endowment as a deliberate
operational learning experiment in Mission
Driven Investing. They saw investments as
an additional tool to drive impact and used
the funds to test various investment vehicles
from deposits in community banks, to funds of
funds, to private fixed income, to direct venture
capital investment. RSF Social Finance decided
to offer its clients portfolios consisting exclusively
of market rate mission managers such as
Beartooth Capital, a real estate investor restoring
and protecting ecologically important land.
The Hull Family Foundation employed an asset
class approach as their core strategy, allocating
100% of its corpus to fixed income impact
investments, both market rate and below market
rate. Each strategy fits the individual goals
of the investors but demonstrates a defined,
thoughtful approach and entry point.
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