Inside Philanthropy: Grantmaking to Champion Impact Investing

It took them some time to come around, but the Surdna Foundation continues to be a big proponent of foundation involvement in impact investing.

Last year, we saw the foundation make a $100 million commitment (about 10 percent of its endowment) toward investing that directly supports its mission or otherwise aligns with its values. The funder just announced $650,000 in grants to organizations that strengthen the field by providing resources and otherwise helping institutions that want to take the plunge.

It’s the latest move for a foundation that has become a champion for the idea of using an institution’s assets, not just for grantmaking, but also to make investments that bring about both social and financial gain. The practice can allow a foundation to align more of its assets behind causes it favors (although some forms of impact investing count toward an institution’s 5 percent mandatory payout).

It’s a hot topic in philanthropy, with a set of funders like the Packard and Kresge foundations, along with smaller trailblazers like the Heron Foundation, practicing and often advocating impact investing. On the other hand, some foundation leaders like Hewlett’s Larry Kramer are less compelled, finding it more impactful to maximize endowments and stick to the main philanthropic mission of supporting nonprofits—although Kramer has also suggested that foundations do have an important role to play in building the field of impact investing so that the large flow of private capital coming into this space is used wisely. Others, particularly smaller foundations, find themselves daunted by the idea of mingling the investment and cause-driven aspects of the operation.

Surdna, a 100-year-old family foundation with close to a billion in assets, was not always so firmly in the pro-impact investing camp. The foundation toyed with the idea in the early 2000s, but backed away. In 2008, the funder realigned with a stronger focus on justice, and then decided to revisit impact investing around 2014. The foundation detailed the process in a candid 2017 report that the team hoped would be helpful to other foundations unsure where to start.

Impact investing, like grantmaking, takes a lot of shapes and sizes depending on who’s doing it. But some justice-oriented funders are recognizing it as a tool for wealth creation and channeling investment into lower-income communities, as well as a way to align the institution’s broader financial activities with its values.

For example, Surdna, which gives to support local economic development, sustainability and the arts, has invested in the Business Outreach Center Network, which lends to minority- and women-owned contractors in New York City.

The recent grants from Surdna are not examples of impact investing themselves, but instead hope to boost activity in the field. Funding is going to some of the standard bearers in impact investing, such as Confluence Philanthropy and the Global Impact Investing Network, as well as to the Foundation Center to develop a new tool to help foundations better understand their investments. This funding is part of a growing stream of grants toward such work, including from Hewlett, which has acted on Larry Kramer’s ideas about how grantmakers can best add value as impact investing soars.

A big strategy in philanthropy, and especially for impact investors, is the concept of leverage—making smaller dollar amounts unlock larger sums. While Surdna’s a good-sized foundation, these grants aim to extend the reach of what they can do by clearing the path for others.

(Source:  Inside Philanthropy | Tate Williams)