Sustainable Investing for Endowments and Foundations: Steps to consider

An article in Forbes offers ideas on approaches a resource-constrained endowment or foundation could take to develop a sustainable investing program.

Each endowment or foundation, as author Bhakti Mirchandani explains, "has an investment philosophy and process, operating environment, capabilities, and organizational structure, which will impact its specific approach to sustainable investing."

Mirchandani shares steps like the following -that should be tailored to fit the endowment or foundation- to sustainably invest:

  • "Determine whether to focus on the environmental, social, or governance (ESG) issues broadly, align with an accepted framework for sustainable investing like the Sustainable Development Goals (SDGs), or only focus on those aspects of ESG or the SDGs that align with the organization’s mission (mission-related investing)."
  • "Establish to which asset classes, investment strategies, or dollar value to apply ESG integration. Consider whether to start with a pilot or whether to start with the breadth of ESG integration envisioned in the long-run."
  • "Define a select number of key quantitative ESG factors per manager (if the endowment’s investment approach includes manager selection), asset class, or strategy. Add questions about these factors to the endowment or foundation’s due diligence questionnaire. Probe these factors during due diligence meetings."
  • "Include the option to redeem investments without penalty based on material ESG lapses in investment management agreement. Integrate ESG monitoring in compliance process."

According to Mirchandani, "by integrating ESG, SDG-, or mission-aligned factors into investment and ownership decisions, endowments and foundations can position their portfolios for the long-term and pursue their missions more holistically."

Read the article here.

Read a new blog post by GIA's Champ Knecht about how our organizational priorities shape our investing.

Join our next webinar on September 24 in which Courtenay A. Barton and Stephen Caviness (The Cleveland Foundation) and Mike Roque (Community Foundation of San Luis Valley) will discuss alternative economies, social impact investing, and sustainable change.

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