The belief that sustainable and responsible investing (SRI) lowers returns is losing ground. A number of foundations have shown that, if carefully implemented, the returns can be as high and the risks no greater than with traditional investment. At the same time, there is a younger generation both of foundation staff and of those setting up foundations that is more in tune with the idea of SRI.
In short, even though they should not hastily embrace it, it is time for foundations to extend a friendly hand to SRI. This is the upshot of a new report produced by Mistra, the Swedish Foundation for Strategic Environmental Research, entitled 360 Degrees for Mission. The report adduces these lessons from an exploration of the approach of eight European foundations who are in the vanguard of SRI, among them Fonds 1818, Fondazione Cariplo, Fondation de Luxembourg, the Deutsche Bundesstiftung Umwelt and Mistra itself.
If it’s not as hard as it looks, what is holding foundations back? Many still believe that it is, suggests 360 Degrees. The report’s authors, David Imbert and Ivo Knoepfel of onValues Ltd, cite a combination of financial concerns (many still believe that financial returns will be affected, while investment managers are reluctant to consider SRI), lack of information, institutional incapacity and simple conservatism – a reluctance to change a long-held investment policy, for instance.
Without making light of the challenges facing those who might be willing to dip a toe in the water, the report suggests that there are enough approaches to suit any foundation. It counsels newcomers to take a step-by-step approach to introducing SRI. Foundations can start with a modest approach, ‘which considerably lowers initial barriers. Learn by doing, but also be patient.’ It points out that there are national sustainable investment forums (SIFs) and the Principles for Responsible Investment initiative which provide – often free – services and resources to foundations. The report also argues that national foundation associations should play a more active role in disseminating know-how about the use of SRI and impact investing at foundations.
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