Forum FoundationThe Mission in the Marketplace

Social Investment

How Responsible Investing Can Strengthen the Fiduciary Oversight

of Foundation Endowments and Enhance Philanthropic Missions

2007

A Brief IntroductionThis PowerPoint is based on a booklet produced by the

Social Investment Forum Foundation entitled, “The Mission in the Marketplace: How Responsible

Investing Can Strengthen the Fiduciary Oversight of Foundation Endowments & Enhance Philanthropic

Missions.” This booklet can be found online at http://

www.socialinvest.org/pdf/research/MissionintheMarketplace.pdf.

Acknowledgements: J.A. & H.G. Woodruff, Jr. Charitable Trust

Foundation Partnership on Corporate Responsibility (

www.foundationpartnership.org)

An Invitation to Foundations & Endowments

Responsible Investing Strategies

• Social and Environmental Screening

• Shareowner Advocacy• Community Investing• Social Venture Capital

Creating Value

“[F]oundations are not simply vehicles for distribution of charitable gifts, but rather investors in value creation.”

— Jed Emerson Generation Foundation

What is Responsible Investing?

Responsible investing is an investment process that considers the social and

environmental consequences of investments, both positive

and negative, within the context of rigorous financial analysis.

Terminology

The incorporation of environmental, social, & governance (ESG) factors into investment management has been described in a variety of ways: social investing, mission-related investing, values-based investing, socially responsible investing (SRI), ethical investing, double- or triple-bottom-line investing, and responsible investing. This report will use a number of these terms.

Socially Responsible Investing (SRI)

SRI incorporates issues of Corporate Social Responsibility (CSR), ranging from environmental

concerns to human rights and supply-chain management, from

workplace health and safety to equal employment opportunity and human

resources policies.

Responsible Investing’s Scope and Scale

• Over $3.6 trillion: Global SRI Assets by Institutional Investors

• Over $2.29 trillion: U.S. SRI Assets under professional management

• Over $4 trillion: Assets of institutional investors backing UN Principles for Responsible Investment

• Over $6 trillion: Assets of UN Global Compact endorsers

• Over 26% Annual Growth in US SRI Assets 1995-2005

Fiduciary Prudence, Performance & Mission-Based Investing

• Consideration of sustainability as an element of prudent trusteeship

• Recognition of “extra-financial” benefits

• Added economic value of environmental performance

• Competitive long-term performance• Variety of options across investment

styles, instruments, and asset classes

Social and Environmental Screening

The Incorporation of Environmental, Social and Governance (ESG) Criteria

into Investment Analysis

• Negative Screening Avoids Poor CSR Performers

• Positive Screening Identifies Strong CSR Performers

• “Best-of-Class” Screening Identifies Sector Leaders

Largest Foundations Employing Social or Environmental Screening*

• Bill & Melinda Gates Foundation

• Ford Foundation• David and Lucile

Packard Foundation• California Endowment• Annie E. Casey

Foundation• Rockefeller

Foundation• Carnegie Corporation

of New York

• California Wellness Foundation

• Robert Wood Johnson Foundation

• Charles Stewart Mott Foundation

• Carnegie Corporation of New York

• Heinz Endowments• William Penn

FoundationAmong 50 Largest Private Foundations

Source: Chronicle of Philanthropy, 2006*May include a single screen, such as tobacco

Shareowner Advocacy

• Active Proxy Voting

• Filing and Co-filing Resolutions

• Direct Dialogue with Management

• Participation in Shareowner Coalitions and Networks

Recent Shareowner Successes

• Climate Change and Carbon Disclosure

• HIV/AIDS Policies at Coca-Cola and PepsiCo in Africa

• Labor Conditions at Taco Bell and Yum! Brands

• Fair Trade at Procter & Gamble

Shareowner Engagement Networks

• Council of Institutional Investors• Foundation Partnership for Corporate

Responsibility• Interfaith Center on Corporate

Responsibility (ICCR)• International Corporate Governance

Network• Investor Network on Climate Risk (INCR)• Jewish Shareholder Engagement Network• Social Investment Forum

Recent Social Shareholder Resolution Proponents Among Foundations

• As You Sow Foundation

• Camilla Madden Charitable Trust

• Conservation Land Trust

• Edward W. Hazen Foundation

• Funding Exchange• Haymarket People’s

Fund• Jessie Smith Noyes

Foundation• Lemmon Foundation

• Max and Anna Levinson Foundation

• Nathan Cummings Foundation

• Needmor Fund• Pride Foundation• Tides Foundation• United Church

Foundation• Wisdom Charitable

Trust

Community Investing (CI)

• Provides capital to traditionally underserved communities

• Generates high-impact social returns• Supports affordable housing, child care,

and sustainable economic development• Provides diverse investment

opportunities, from below-market deposits to risk-adjusted, market-rate returns through debt, equity and venture capital

Community Investing Institutions

• Community Development Banks• Credit Unions• Loan Funds• Venture Capital• International Microfinance

Funds• Grown from $4 billion in 1995

to nearly $20 billion in 2005

Sample Foundation Leaders in CI

• F. B. Heron Foundation• Jewish FundS for Justice (JFSJ)• A. J. Muste Memorial Institute• Rose Foundation for

Communities and the Environment

Social Venture Capital

• “Double-bottom-line:” both financial and social returns

• Alternative Investment opportunities in early-stage private equity

• Debt financing to support non-profit social enterprises

• Over $600 million in capital from “Angel Investors” and Institutions alike

Getting Started• Conduct Research and Gather Resources

• Ask Whether Your Existing Managers and Consultants Have the Necessary Expertise

• Consult a Financial Advisor with Expertise in Mission-Related Investing

• Have a Strategic Conversation within Your Organization on Your Investment Policies

• Present Findings to Your Foundation Board or Investment Committee

continued

Getting Started

• Develop Active Proxy Voting Guidelines

• Draft a New Responsible Investing Policy

• Explore Community Investing Opportunities

• Lead by Example: Share Knowledge & Best Practices

• Join Responsible Investor Networks

The Social Investment Forum

Dedicated to advancing the concept, practice, and growth of socially and environmentally responsible investing

www.socialinvest.org

The Social Investment Forum1612 K Street NW, Suite 650

Washington, DC 20006phone (202) 872-5361

fax (202) 463-5125

Join online today!