Impact Investing by Private Foundations

Putting Assets in Service of Mission

Imagine that your foundation is dedicated to eradicating childhood asthma in your home state. One day, you are listening to the local news during your morning commute and you hear a report about an aging coal-fired power plant where the sulfur dioxide emissions are so bad as to be implicated in the high incidence of childhood asthma in the neighboring towns.

A week later you are reviewing the foundation’s investment portfolio and realize that you own a good chunk of shares in an energy company—the very same energy company that owns the power plant. In fact, the dollar amount of the company’s stock in your investment portfolio is almost equal to the dollar amount you are putting into your childhood asthma eradication efforts.

This is a common conundrum for private foundations. Many foundations that are established to solve society’s most pernicious problems have investments as their lifeblood. Their assets need to be invested in profitable businesses in order to sustain operations and grow. So what happens when a foundation’s mission is directly contradicted by its own investments? What if the very ills a foundation fights are exacerbated or even caused by the behavior of business entities found in its own portfolio?

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