Many private U.S. foundations that purport to engage in impact investing don’t put much of their money where their mouth is, according to a new report from the Center for Effective Philanthropy.
The study found that these foundations tend to commit very small percentages of their endowment and/or program/grant budget to impact investing.
The CEP collected data in late 2014 and early 2015 on the prevalence of impact investing and negative screening as part of a larger operational benchmarking study with large private foundations that donate $10 million or more a year.
Forty-one percent of respondents said their foundation engaged in impact investing. Of these, 46% focused on community development, 42% on employment/economic development and 38% on education.
A median 2% of these foundations’ endowments went toward impact investing, and just 0.5% of program/grant budgets were allocated to the activity.
The CEP distinguished between impact investing — investing in companies, organizations and funds in order to generate both social and environmental impact and a financial return — and negative screen, which excludes certain companies or organizations from the investment portfolio.
The data showed that 83% of foundation respondents did not exclude particular companies from their investment portfolios by using negative screening.