Our experience has shown us that foundations have struggled with the issues raised within Andrew Milner’s article on foundation investments ‘What happens to the rest of it? How foundations make investments’.
The limits presented by negative screening, and how to align a foundation’s vision or mission with investment operations as well as granting operations, engaging with managers who have the credentials and experience to match mission related investment (MRI) with the foundation’s investment screening criteria.
Most importantly, small foundations in particular struggle with defining what MRI or Environmental, Social and Governance (ESG) issues mean to their organization and from there, giving life to and supporting their values and beliefs through MRI or ESG investing. Too often, foundations are crammed into a manager’s fund that represents every conceivable ESG consideration in order for the manager to capture as many clients as possible.
This in turn becomes an asset gathering exercise rather than a solution that exactly meets the client’s needs. Those types of investments may not further the foundation’s mission nor correlate to the foundation’s core values.
Customizing an investment product to suit the foundation’s needs to meet their MRI objectives is lacking in the investment industry, whereas asset gathering by large managers is proliferating due to the increased demand and attention being paid to the MRI and ESG space.
Lack of proper governance by the foundation’s board of its investments and their correlation to the foundation’s investment policy is also a hindrance to foundations engaging in more MRI or ESG investing. Because there is a lack of experienced investment managers with the know-how and skill to customize products to meet a client’s MRI or ESG investment needs, foundation boards tend to believe entering this space or carrying out this type of investing is not a viable option for their foundation.
They either turn a blind eye to what may be captured within their investment policies or fail to incorporate MRI or ESG investing into their investment policies.
Legal counsel and compliance officer, S18 Asset Management Inc, Canada