Mission Investing and
Foundation Boards
What Boards Need to Know About
Mission Investing
• Five Strategic Questions:
– What is it?
– Why do it?
– Can we do it?
– How do we manage it?
– Where do we begin?
What is Mission Investing?
• Mission Investing is a tool of philanthropy
• Two Components:
– Targeted social (and/or environmental)
benefits
– Targeted financial returns
• Integrated operations:
– Program and finance
• PRIs, MRIs, and Mission Focus
Mission Investing and its Siblings
• Impact Investing: Broader Scope than
Mission Investing, same targets (HNW,
Family Office, Banks, Funds)
• Responsible Investing: Institutional in
orientation; Environmental, Social,
Governance; Long-Term in Focus (Pension
funds, Endowments, Sovereign Wealth
Funds)
• Social Investing: ESG + Values Alignment
(Retail and Institutional Investors)
Mission Investing across Sectors:
A few examples
• Community Investment: Targeted to low- and
moderate income places and people
• Economic Development: Targeted to place,
domestic and international
• Environmental Investment: carbon mitigation,
land conservation, sustainable agriculture
• Health and Healthy Communities: healthcare
provision, smart growth, health outcomes as
measurement
• Arts: Support for arts generally, access to
underserved communities
What Mission Investing looks like
• Add two relevant examples (to whom you
are talking) here, with foundation doing
the investment and vehicle through which
they invest highlighted.
Why do Mission Investing?
• Institutional Mission
• A new tool in the toolbox:
– Expanded resources internally
– Leveraging resources externally
– A new form of engagement with grantees,
policymakers and other stakeholders
• Donor Engagement
• Value alignment
• Total Philanthropy!
A famous quotation
• “Should a private foundation be more than
a private investment fund that uses some
of its excess cash flow for charitable
purposes?”
State of the Field
• We don’t know
The Opportunity Set
• Mission investing across asset classes:
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Banks and Credit Unions
Fixed income and loan funds
Public equities and shareholder engagement
Private equity, venture capital, and direct investing
Real estate and real assets
• How to find opportunities:
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Trade associations
Databases
Conferences
Peers
Can we do mission investing?
• What’s needed internally:
– Strategy and Process:
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Targets for mission investing
Building resources
Due diligence of opportunities
Board level review
– Capacity across functions:
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Building a pipeline
Evaluating financial viability
Evaluating social return
Legal review; management and monitoring
Challenges to consider:
• Agency issues:
– Boards
– Staff
– Consultants
– Managers
– Grantee/Investees
• Mission fit and deal flow
• Time horizons and management
• Measuring impact
How do we manage mission investing?
• Structure:
– Board level oversight:
• Sub-committee
• Coordinating with Program and Finance
committees
– Investment Policy Statement
• Clear targeting of priorities
• Explanation of risk/return expectations
How do we manage mission investing?
• Process
– Engaging Staff (and full Board)
– Communication to stakeholders:
• Engaging existing service providers
• RFPs for new service providers
• Identifying investment opportunities
– Due diligence/underwriting
• Establishing benchmarks for social return
• Reasonable assumptions about rates of return
Some Questions to Consider
• What resources?
– Source of investment funds
– Integrated approach vs. carve out
• How narrow the target?
– Tight mission fit vs. bigger pipeline of
opportunities
• Who will manage?
– Dedicated staff or new mandate for existing
programs?
– Internal vs. external management of underwriting
and management
How do we start?
• Internal Champions
• Educate Board and Staff:
– Scan the field (what other foundations are doing,
what is happening in impact investing)
– Scan your own opportunity set (grantee pool,
place- and sector-based intermediaries and end
users)
– Bring in practitioners
– Present these findings to the board and to staff
• Dip your toe in the water (depositories are
one relatively easy place to start)
What to watch out for
• Investments that should be grants
• Grantees that misunderstand that
investments are not grants
• High transaction costs
• Greenwashing
What can you hope for?
Better outcomes for people and places
Better outcomes for grantees and investees
More effective use of foundation resources
Leveraging of other resources from
donors, foundations, anchor institutions,
impact investors, etc.
• More knowledge about mission areas; new
ways to engage stakeholders
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