Impact Investing | February 21, 2024

California Endowment goes ‘all-in’ on impact

Andrea Riquier
ImpactAlpha Editor

Andrea Riquier

“Be the change you want to see,” is how The California Endowment chief Robert Ross summed up the foundation’s goals in a late 2022 interview. The foundation is now putting Mahatma Gandhi’s advice to work and going “all-in” on impact.

The foundation plans to move its entire $4 billion endowment to investments that align with its mission of supporting health and racial equity, making it one of the largest foundations to align their investments with their missions. 

“The board is convinced that this is the right way to go,” board chair Kurt Chilcott told ImpactAlpha. “The communities and the people that we care about and serve are not benefiting from the standard investment industry, and we need to put all of our assets behind our mission.”

The Endowment has always used negative screens to weed out investments in tobacco, for-profit prisons and firearms. As it looked to be more intentional, the Endowment carved out $350 million for mission- and program-related investments that have supported California-based community development financial institutions and affordable housing intermediaries, as well as diverse fund managers such as Illumen Capital and Harlem Capital Partners.

In 2023, the foundation made $170 million in grants.

Given the size of the endowment, it will take time to transition them to an all-impact portfolio, noted Chilcott and Amy Chung, the Endowment’s managing director for impact investments. Among the questions still to be answered: what kinds of criteria will be used for determining investment areas, and how to measure success, both financial and programmatic? 

The Endowment is currently working to develop an impact investment framework, Chung said, that would cover both areas. 

“We think the field of impact investing and the supply of authentic impact investing opportunities is going to grow,” Chung told ImpactAlpha.

Everybody in

The California Endowment joins a small but growing number of foundations, including the Heron, Nathan Cummings and Russell Family Foundations, that have committed to aligning 100% of their portfolios to their missions. The F.B. Heron Foundation, which in 2012 became the first foundation to make such a commitment, achieved its goal in 2017. 

The Kataly Foundation, a $450 million foundation focused exclusively on building power and asset ownership in Indigenous, Black and other communities of color, has embarked on a similar journey. 

Even as concerns linger about giving up market returns in pursuit of an all-impact portfolio, some institutions have been able to match or even beat their benchmarks. Still, the vast majority of foundations continue to allocate 5% of their endowments annually to grants and invest the 95% of their assets in business as usual. 

As one of the heavyweights in the field, The California Endowment sees its goal in going all-in as “influencing the marketplace,” Chilcott said. “We need others to join us in this journey.”