Low-risk investment companies that channel a small percentage of their assets into philanthropy – that’s how Clara Miller, president of the Heron Foundation described foundations in an interview with Alliance a year ago. It’s on that ‘small percentage’ that the spotlight generally falls. What happens to the rest of it? How are those investments made and in what, and – perhaps the most obvious question of all – shouldn’t more of them be made to serve foundations’ ultimate purpose?
This article deals with foundations with investable assets, so many corporate foundations, for example, lie outside its scope. The same goes for countries like India where there are strict rules governing foundation investments and where the sector is young and, as Amitabh Behar of the National Foundation for India observes, ‘has little experience in terms of making full investment policies but I am sure the question will confront us soon’.
It also excludes programme-related investments. Though the distinctions may be hard to maintain in practice, what we are concerned with is what are variously called environmental, social and governance (ESG) investment and social investment, impact investment and mission-related investment (MRI).
How do foundations make investments?