erin shackelford 2015Are so-called “too big to fail” banks an issue that investors should factor into their decision making? This is the topic we considered in the Trustee Leadership Forum for Retirement Security’s quarterly webinar series, held earlier this month. MIT Professor Simon Johnson and the AFL-CIO’s Director of the Office of Investment Heather Slavkin Corzo spoke to pension trustees about current risk-return considerations around bank consolidation and bank size.

TBTF banks are a good example of a long-term issue of embedded risk that responsible investment is designed to integrate into decision-making. Funds may view TBTF banks as good investments as individual pieces of a portfolio. However, investors who view investment decisions through a systemic, long-term lens may also view these banks as creating risk and volatility for the market as a whole, and potentially posing a risk to the economy, their communities, and/or the participants of their funds.

As a follow-up to the webinar, the TLF has produced a new resource on TBTF banks to assist pension trustees in thinking about the issue. The TLF “Note on Too Big to Fail Banks” provides an overview of the topic, questions that pension trustees might consider, ideas on how to approach integrating the issue into investment strategy, and a list of further reading.

[read more…]

david feb 2013 smallOn September 15th, the IRS issued new guidance on mission investing by private foundations that clarified that foundations can use their endowments to further their mission without fear of incurring tax liabilities. The purpose of the guidance is to reassure mission investors that so long as they use a clear, prudent process for underwriting their investment decisions—don’t take unnecessary risks to the needs of executing the foundation’s mission, and so on—they can target social goals through their investments. Because they represent organizations with a specific public purpose, the IRS says, “foundation managers may consider all relevant facts and circumstances, including the relationship between a particular investment and the foundation’s charitable purpose” when making their decisions.

What does this new guidance mean for the field of mission investing? In the first place, it affirms what advocates have long argued: there is no reason why foundations shouldn’t be able to think about their social goals when making their decisions. There have been skeptics who argue that investing a private foundation’s endowment must look only to financial performance, regardless of the organization’s mission—this new guidance makes that argument that much harder to make.

But there’s another way to think about what the guidance means to the field. It reinforces the idea that there are ways to prudently invest with social goals in mind, and so offers support for the broad field of responsible (and impact, sustainable, social, etc.) investing. And for private foundations, it makes explicit the notion that endowments are not just captive pots of money, but are themselves potential tools with which to do things to improve the world. This is something of a break from the conventions of the recent past, in which finance has frequently been seen to be its own domain, disconnected from society and subject only to its own internal rules.

[read more…]

Small-staffed foundationsWe are excited that our partners at Mission Investors Exchange, along with Arabella Advisors and Exponent Philanthropy, have released Essentials of Impact Investing: A Guide for Small-Staffed Foundations. The Guide includes advice, tools, and case examples designed for foundations with few or no staff who want to align their investments with their mission.

IRI Director David Wood authored a chapter in the Guide titled “Engaging and Making the Case to Trustees,” which outlines a strategic approach to board engagement in implementing an impact investing strategy. The chapter includes advice on introducing the topic to trustees, providing opportunities for board education, and building support from within. A list of Five To-Dos for Foundation Champions encapsulates concrete actions for intentionally building capacity for impact investing, including questions for reflecting on goals, message, trustee dynamics, and advisor support.

You can find the report here on the Mission Investors Exchange website.