In July 2016, the Council on Foundations and Commonfund Institute released a new study of responsible investing practices at US private and community foundations. The survey investigated policies, perceptions and practices related to how foundations align investment of their endowments with their charitable purpose. With nearly 200 respondents, it is the largest study of its type for American foundations.
The Study of Responsible Investing confirms that environmental, social and governance (ESG) factors, socially responsible investing and impact investing feature prominently in conversations among board, staff and donors of US foundations. More than a third of respondents have adopted or are considering adopting one of these practices for managing their endowment. Others noted that these strategies are used for non-endowed funds.
The study also highlights several impediments to further adoption. Many respondents cited limited knowledge of the practices. For instance, 48 per cent did not know or were unsure whether socially responsible investing is permissible for foundations under US law. This is particularly significant, as the survey was conducted immediately before new guidance from the US Treasury Department clarified that foundations may include charitable impact as a factor in weighing investment options, clearing a path for socially responsible investment by foundations to increase.
It will be interesting to see how this and other regulatory changes, alongside increased awareness of these practices, will affect adoption in future. The Council and Commonfund also publish an annual study of endowment investment practices and performance. The 2015 edition of that study will be released after this issue goes to print.