A new study released jointly by the Council on Foundations and Commonfund Institute found that a third of U.S. private, public and community foundations have implemented or are actively considering mission-related investing practices in managing their endowed assets.

However, impediments to adoption remain. Concern over returns was the single most commonly reported barrier, with 23% of foundations considering it a significant one and 48% a moderate one.

The study was conducted during this past winter among 52 U.S. private and public/community foundations, 49 private/family foundations, eight public foundations and 77 community foundations. Together, these institutions represented $39.7 billion in endowment assets as of Dec. 31, 2014.

The study is intended, the two groups said in a statement, as a tool for investment committees, board members and investment staffers who are exploring new strategy options.

“This is particularly relevant today as many foundations are asking if their investments can be invested in other ways beyond traditional grant making to deliver benefits to the communities they serve and complement the efforts central to the foundation’s mission,” CoF president and CEO Vikki Spruill said.

“Our hope is that this study will help inform and educate philanthropy on practices increasing in popularity.”

The study, noting that a vocabulary of responsible investing practices is yet to be standardized, provided definitions of four of these:

  • Socially responsible investing tries to avoid investment in certain stocks or industries through negative screening according to defined ethical guidelines
  • Environmental, social and governance involves integrating the three ESG factors into fundamental investment analysis to the extent that they are material to investment performance
  • Impact investing, also known as mission-related investing, refers to investment in projects, companies, funds or organizations to generate and measure mission-related economic, social or environmental change alongside financial return
  • Divestment of fossil fuel is an exclusionary screening strategy through which investors actively exclude companies involved with fossil fuels from their investment portfolio

Among the study’s findings, 48% of respondents said they did not know or were uncertain whether responsible investing was consistent with their fiduciary duty.

The report noted that survey participants answered researchers’ questions before or immediately following the release of new Treasury Department guidance that clarified this point. It remains to be seen what effect this clarification and other regulatory efforts will have, the report said.

The research showed that while 86% of both adopters and non-adopters said they had a written investment policy statement, only 25% said their IPS referred to one or more of the four responsible investing practices.

Seventy-one percent of all respondents said their policy neither permitted nor referred to one of the practices addressed in the study.

Impact investments were the most popular approach to responsible investing among surveyed foundations. Sixteen percent of all respondents and 65% of adopters said their IPS allowed or referred to impact investments.

They most frequently cited community economic development as the impact area in which foundations were most likely to increase their mission-driven investments.

SRI was the next most practiced approach, with 12% of all respondents and 48% of adopters saying it was allowed or referred to in their IPS.

Sixty-three percent of adopters reported dedicating between 1% and 20% of endowment assets to this practice.

Nine percent of all survey participants and 35% of adopters said their investment policy statement allowed or referred to ESG. Among foundations that cited ESG, 57% invested 1% to 20% of endowment assets in strategies seeking to integrate ESG factors, while 29% committed between 61% and 99% of endowment assets.

Just 3% of study participants and 10% of adopters cited divestment of fossil fuels.

— Check out 4 Ways Impact Investors Are Driving Change  on ThinkAdvisor.