Richard Graves

Archive for the ‘Philanthropy’ Category

New paradigms: How mission investing is transforming traditional philanthropy

In Innovation, Philanthropy on August 31, 2011 at 9:02 pm

This is a guest post by Sonja Swift, the Family Philanthropy organizer for Resource Generation and a NextGen Fellow in Mission Related Investment.

Traditional philanthropy is based on a very simple notion: make as much money as possible with the foundation’s endowment and give away grants to address social problems. Meaning that 95% of the endowment is invested in whatever will bring in the highest return, while the other 5% is donated annually. For the entire 100+ years of philanthropy’s existence this has been the accepted model; premising the field of philanthropy entirely upon the mere 5%.

I’ll be the first to admit this never made much sense to me.

Turns out that this premise is now being challenged even from within the original philanthropic institutions. “This works in a world where two assumptions hold true,” explained Antony Bugg-Levine, Managing Director at the Rockefeller Foundation during the first MRI Fellowship learning call, a year long learning series on mission investing organized in partnership by Resource Generation and Confluence Philanthropy. “And these assumptions have been taken for granted to the point no one articulates them. They are that 1): the only way to address social issues is through charity. And 2): the only reason to invest is to make money.”

Impact or Mission-Related Investing (same idea, different lingo: investing with values intact or more specifically, in alignment with the philanthropic mission) fundamentally rejects those assumptions. The assumption is instead that for-profit can be economically sound while also addressing social issues.  For traditional philanthropy this is a paradigm shift. “This has profound implications for philanthropy. Do not underestimate how disruptive this new truth is to existing systems of philanthropy,” furthered Bugg-Levine. Foundations have a fiduciary duty to use their assets mindfully and in line with their mission. When the notion that this mandate only applies to the grant dollars looses ground a lot of money comes into question.

The total amount of grant dollars flowing through the Environmental Grantmakers Association in 2008 amounted to approximately 600 million dollars.[1] Seems like a lot, no? But British Petroleum spent the same amount that same year on biofuels research alone. This is what philanthropy as purely grantmaking amounts to: not enough. On average foundations lost 40% of their endowments by spring of 2008, yet tales tell that foundations employing an MRI strategy lost more in the range of 10-20%. The 2010 report Socially Responsible Investing Trends in the US report findings convey a similar scenario, making a solid case for how prudent this kind of investing is especially amidst tumult. Read the rest of this entry »

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A Modest Story About Moving Cash

In Articles, Philanthropy on July 19, 2011 at 10:42 pm

This post is cross-posted from the Resource Generation Blog and is by Farhad Ebrahimi. 

Howdy! Farhad Ebrahimi from the Chorus Foundation here. I’d like to tell you a little story, if you’ve got a moment. It’s the story of how we moved our cash holdings from a large financial services company (Fidelity Investments) to a local socially progressive bank (Wainwright Bank & Trust Company, now a part of Eastern Bank). It was a pretty simple process, and it’s been a key part of how we’ve brought our investment portfolio to bear on the same issues that we address with our grantmaking.

But first, some background information

The Chorus Foundation is a small, Boston-based private foundation that I set up four years ago to focus on issues of environmental sustainability. If you’ll recall what was happening in the financial world at the time, you’ll appreciate how lucky we were that the vast majority of the initial contributions were made in cash. It was not unlike the scene in “Steamboat Bill Jr.” where an entire building facade falls onto Buster Keaton, only he just happens to be standing in the gap created by one of the open windows.

As time went on, we slowly began to invest that cash (emphasis on ssslllooowwwlllyyy). Our hesitation was only partially due to the lingering feeling that we’d just narrowly avoided being flattened; we’d also caught the mission-related investing (MRI) bug, and we weren’t terribly interested in deploying any cash for anything that didn’t fit the bill.

Read the rest of this entry »

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Resolving the Great Contradiction

In Articles, Innovation, Philanthropy on June 30, 2011 at 7:31 pm

At the heart of philanthropy is a great contradiction, one that our generation is struggling to resolve. Many philanthropists accumulated their wealth through disruptive innovations, ruthless business practice, or as Balzac said “great wealth with no obvious source is some forgotten crime, forgotten because it was done neatly.”

Many of the great industrialists, whose names are now synonymous with philanthropy, Rockefeller, MacArthur, and Vanderbilt, in life were rapacious men who struggled against labor, environmental, and social reforms, and lived in opposition to many of the causes that their legacies now support.

The reality that many of the leading climate change campaigners meet in John D. Rockeller’s mansion, Pocantico, to strategize how to implement climate legislation in the face of the hostility of Exxon-Mobil, the reunited children companies of Standard Oil, has an intrinsic irony that should be lost on no one.
Yet, this is the reality of philanthropy, where the fortunes from oil, railroads, aviation, and agribusiness fund civil society groups that take up the tools of petitions, boycotts, and organizing against latter-day robber barons.

This may be part of the reason why many foundations struggle with their split identities, working within the IRS defined mission of serving a charitable, scientific, literary, and educational purpose, but finding that many challenges have a root cause that implicates not only where their money came from but how it is currently used. Read the rest of this entry »