hand holding growing money

Aligning Investment with Values

Like some of your clients with their own personal investments, community foundations around the nation are looking for ways to maximize their resources to help the communities they serve beyond traditional investments. The Community Foundation began exploring opportunities in early 2019 for different investment strategies to further align our mission of social good with financial return, expand our donor network and make a social impact at the same time.

Socially responsible investing dates back decades. It has evolved from strictly avoiding investments in certain stocks and industries through negative screening (such as avoiding investing in companies involving tobacco) to incorporating various strategies such as integrating environmental, social and governance (ESG) factors into financial returns, and deploying negative and positive screening of companies. Socially responsible investing in the U.S. has grown significantly in recent years. Total assets under management with ESG integration grew from $12 trillion to $17.1 trillion between 2018 and 2020; this is an increase of 42% according to the Forum for Sustainable and Responsible Investment’s 2020 Trend Report. Many studies have also found that funds incorporating social investing strategies are on par or exceeding their benchmarks while also offering lower market risk. Further, these funds provide a diversity, equity and inclusion approach to investing and have unique appeal to diverse demographics, including women and millennial investors.

Given the validated industry research and the growing trend we have been seeing among our peers implementing socially responsible investing pools with proven financial returns, our board agreed that it was extremely important to offer an alternative investment pool that emphasizes social and environmental benefits. Our staff conducted discernment conversations with our board members to identify which values and impact areas are important to the Community Foundation. This exercise allowed us to establish a values framework incorporating ESG factors in early 2021 and we have now successfully implemented a Sustainable, Responsible Impact (SRI) investment pool for our current and prospective donors and fundholders.

Our SRI investment pool seeks to support, promote and advance the values and impact areas embodied in our mission and vision. The primary values identified that are guiding our SRI pool are community, leadership, diversity, excellence, service, empathy, compassion, justice, and respect. Thus, the investment firms will identify funds to actively remove or include based on specific ESG factors that will address the following values and impact areas chosen by our board of directors under the guidance of 17 United Nations Sustainable Development Goals (SDGs): Quality Education, Ending Poverty, Anti-racism, Arts & Culture, Well-Being of Children, Economic Justice, Environment, Human Rights, Literacy, and Public Policy/Advocacy. The SDGs were adopted by world leaders at the 2015 United Nations Sustainable Development Summit. They provide a collective roadmap for sustainable investments and have become standard global metrics used in the investment sector for ESG framing. In addition to selecting investments that operate in these areas, positive and negative screens related to activities that impact these areas may also be used.

Our investment consultant, Crewcial Partners, who has advised our Finance Committee on our main investment pool for over 25 years, helped us create our SRI investment pool. They have created socially responsible investment pools for many of our peer community foundations, and have ensured diverse investment managers are part of our main investment pool. Crewcial’s approach seeks to align our values with a well-diversified portfolio. Investments for the SRI investment pool are selected using the criteria selected by our Finance Committee and are evaluated on those criteria in a rubric that weighs investment philosophy, values alignment, performance and impact.

We capitalized our SRI investment pool with an existing field-of-interest fund that aligns with the identified values above by supporting the environment, outdoor parks and recreation areas, providing access for hunting and fishing and other programs involving youth. We hope to grow our SRI investment pool along with our main investment pool over the next few years from the support of our existing and prospective fundholders and also deploy more of our current funds that align with the chosen values framework for this pool.

If you have clients interested in emphasizing social and environmental benefits when investing their charitable funds, please contact me at pmurphy@cnycf.org or 315.883.5540.

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