2030 Finance | March 14, 2018

With new pledge, another foundation moves to align endowment with mission

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This is no time for business as usual, Sharon Alpert, president of the Nathan Cummings Foundation, made clear in a note last year, when the foundation boosted its grant-making to challenge xenophobia, racism and attacks on democratic institutions and the legitimacy of the press.

Now, the 70-year-old foundation is taking another business-not-usual step — for philanthropy — by pledging to align its entire $443 million endowment with its mission, including fighting climate change and income inequality.

Cummings is one of the largest foundations yet to commit itself — over time — to 100% mission-alignment and to break down philanthropy’s historical divide between the investment side of the house, which was traditionally charged with making money, and the program side, which was responsible for giving it away.

“The problems we work on are market problems that need market solutions,” Alpert told ImpactAlpha in an interview. “We need capital markets to change to drive sustainable inclusive growth. We need the markets to produce an economy that leads to equality.”

New business models

In a statement, Alpert added that the move is an opportunity for the Cummings Foundation to “join and leverage a chorus of philanthropic and private sector investors changing the landscape for investing and the business model of philanthropy.”

The F.B. Heron Foundation last year announced that it had met its goal, set in 2012, to align 100% of its approximately $250 million in assets with its mission of fighting poverty. The Ford Foundation last year announced it would carve out $1 billion from its $12.4 billion endowment for so-called mission-related investments. The Kresge Foundation, in Detroit, in 2016 made a $350 million commitment to mission- and program-related investments from its $3.6 billion endowment. Other foundations, including McKnight and the Wallace Global Fund, are also making mission-related investments from their endowments.

A second look at the Ford Foundation’s big shift toward impact investing (podcast)

Clara Miller, now the Heron Foundation’s president emerita, called Cumming’s move “an action about system-change.” In an email, she said, “We foundations are part of the economy, and a stand for 100% means we shoulder that responsibility squarely. Cummings embodies that in making this decision. Yay!”

Organizational journey

Cummings’ move has been a more than a year in the making. At the outset, Alpert acknowledges, “We were not in total agreement and total alignment.” She said the skepticism included concerns about the availability of deals, whether it is possible to achieve a market-based rate of return, and how to measure impact. Last April, the foundation enlisted Sonen Capital to craft the plan, and brought on impact investment veterans Lisa Green Hall to its investment committee and Rey Ramsey to its board.

In the end, the decision was unanimous among both the board and investment committee. Ruth Cummings, the chair of the board, said in a statement, “We have committed to align all of our assets for impact in order to receive more social return on investments.” Added board member James Cummings, “So many of us have been advocating for more holistic resource integration for many years.”

It will take at least the rest of this year to develop an investment policy statement, establish benchmarks for progress and set a timeline. “We are committed to moving with care but also with urgency,” Alpert said.

Shareholder engagement

As part of the announcement, Cummings said it would continue to work with its “outsourced” chief investment officer, Global Endowment Management, or GEM. Such asset manager typically have commingled funds and standardized portfolios that make customization difficult. When the Rockefeller Brothers Fund raised its impact investing ambitious several years ago, it switched to a new outsourced CIO, Perella Weinberg Partners, which agreed to manage its endowments as a separate account.

In Cummings case, GEM has signed on for the challenge. “We recognize the importance of mission-alignment as the next frontier of endowment investing, said GEM’s Stephanie Lynch.

“Alignment” does not necessarily mean divestment, even from companies with practices the foundation would like to see changed. The foundation has long had an active strategy of shareholder engagement and, for example, worked with partners on a successful campaign last year to pass a shareholder resolution demanding climate-risk accounting from Occidental Petroleum. The foundation has also pressed for votes against excessive executive compensation packages.

“There will be examples where we will continue to be an active owners strategically in order to further our mission,” Alpert said. “We think there’s opportunity and leverage in moving more and more companies to change their behaviors and practices.”

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