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January 24, 2018
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Recently several well-known philanthropic organizations have taken big steps to align their investment policies with their philanthropic or mission related goals.  As we embark on 2018, now is a good time to consider if you would like to have your investments more in line with your own beliefs. Is this a step you want to take personally, or for a foundation or charity in which you are active? 

To help you answer this question, I will explain a little about the process of aligning mission and investments, share a few examples, and then provide a few tips on getting started.

The alignment of mission goals and/or personal values with investments is done in several ways.  Direct impact investing or grant making is one such route.  The other focusses on the underlying investment assets of the endowment, foundation, or an individual’s personal and retirement accounts.  In this approach, the broad implications of all investments must be measured.  This is done based on environmental, social, and (corporate) governance metrics or ESG.  Examples of typical considerations range from resource allocation, environmental footprint, safety of products, workplace safety, corporate citizenship, adherence to laws, and executive pay.  Broadly speaking, a company that focuses on sustainability in all facets of its business will score higher on these fronts and likely be a better consideration for mission/values investing.

The Heron Foundation:  In its self-study and journey towards impact and socially aware investing, the Heron Foundations noted, “Foundations have a duty of obedience to public purpose, including the specific philanthropic mission of the institution.  Out of this duty arises an obligation to examine their investment portfolios on an ongoing basis to identify holdings that may unintentionally do harm to their mission…”[1]  They went on to note, “All investing is impact investing. All enterprises, regardless of tax status, produce both social and financial results on a spectrum from positive to negative, including neutral.[2]  These realizations and understandings led the Heron Foundation to adopt an ESG and Impact focus to its endowment.

The Rockefeller Brothers Fund:  In 2014 the fund instituted a policy to divest from investments that conflicted with their mission.  Additionally, the organization set a target of 20 percent for impact investments that will align with their grant making goals.  One example of their impact investments is a $12.5M contribution to renewable power (like wind turbines) in South Africa.  Importantly, the fund has indicated that it will accomplish these goals with prudence, noting “…we will carefully pursue our impact investing and divestment efforts, balancing the objectives of mission-aligned investing and endowment preservation.” [3]

These two approaches to the question of mission and investment alignment show that there is no “right way” to tackle the question.  The bottom line is that every organization/individual is different and must chart its own path in this arena. 

When considering this approach, it is important to know that ESG investing is no longer just divesting or the exclusion of certain investments.  It has evolved to include shareholder and management engagement to press for positive change on ESG issues.  It also includes investing in best-in-class companies that promote ESG and sustainability.  Investing with an ESG lens should ensure that your financial professional takes into consideration material facts that extend beyond traditional financial considerations. Importantly, multiple studies have supported the use of ESG metrics to achieve both positive financial and social performance.[4] 

So how do we/I get started?[5] 

First educate yourself and/or board members on ESG investing.  Then begin to make changes in the portfolio.  Consider starting with just a portion of the portfolio.  This will allow you to gain comfort with the new methods.  Also, initially it is a good idea to stick to publicly traded securities (stocks, bonds, funds).  This will avoid potential lock-up periods and illiquidity issues found in many private non-traded investments.  You should also endeavor to track investment performance and ESG impact within your portfolio to ensure your mission and fiduciary duties are being met.  Several initiatives that your investments can support include:  the environment, international impact, women’s empowerment, workplace equality, animal welfare, as well as Judeo-Christian and Catholic values.

Verdant Investments can help with this process as a consultant and/or in an investment advisory capacity.  We are a dedicated ESG investment manager and welcome you to lean on us for education, Investment Policy Statement creation, investment management, and impact/performance reporting. 

To learn more visit us at or call 859-446-7917.

Justin Sautter is the Team Leader and Founding Partner of Verdant Investments, a division of Russell Capital Management.  Justin focuses on building sustainable portfolios for institutions and individuals with measurable impact on social, environmental and governance issues.  Additionally, Justin is available for professional consultation and public speaking on the subject of ESG.