Social Investment

1
Social Investment

• How Responsible Investing Can
• Strengthen the Fiduciary Oversight
• of Foundation Endowments and
• Enhance Philanthropic Missions

2007
2
A Brief Introduction

• This 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/Missionin
  the
• Marketplace.pdf.
• Acknowledgements
• J.A. H.G. Woodruff, Jr. Charitable Trust
• Foundation Partnership on Corporate
  Responsibility (www.foundationpartnership.org)

3
An Invitation to Foundations Endowments

• Responsible Investing Strategies
• Social and Environmental Screening
• Shareowner Advocacy
• Community Investing
• Social Venture Capital

4
Creating Value

• Foundations are not simply vehicles for
  distribution of charitable gifts, but rather
  investors in value creation.
• Jed Emerson
• Generation Foundation

5
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.

6
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.

7
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.

8
Responsible Investings 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

9
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

10
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

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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 Foundation
• Among 50 Largest Private Foundations
• Source Chronicle of Philanthropy, 2006

May include a single screen, such as tobacco
12
Shareowner Advocacy

• Active Proxy Voting
• Filing and Co-filing Resolutions
• Direct Dialogue with Management
• Participation in Shareowner Coalitions and
  Networks

13
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

14
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

15
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 Peoples 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

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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

17
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

18
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

19
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

20
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
21
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

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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 650Washington, DC 20006phone (202)
  872-5361 fax [phone]
• Join online today!