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Financial Planning > Charitable Giving > SRI Impact Investing

Foundations Want Information About Impact Investing

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Nine in 10 private foundations in a new survey from Foundation Source said they were somewhat interested in impact investing.

But only 51% of foundations polled put their money where their mouth was, allocating at least a small percentage of their investment portfolios to impact investments, while 48.9% said they had not put in any of their assets.

Of foundations that were active in the sector, 3.3% said all their assets were in impact investments.

Researchers asked study participants which examples of impact investing their foundation had tried. None, said 54% of respondents.

At the same time, 28% said their foundations had tried negative investment screening, 23% said investing in for-profit companies that advance the foundation’s mission and interests, and 22% said positive investment screening.

The survey findings were based on the responses from 122 of Foundation Source’s private non-operating foundation clients (those that make grants to public charities, but are not primarily focused on running their own programs).

Of these, 46% have assets between $1 million and $10 million; 25% have less than $1 million; 23% have $11 million to $50 million; and 6% have more than $50 million.

To Invest, or Not

Among the 51% of foundations that opted for impact investing, 30% said their chief motivation was to create philanthropic impact while generating some financial return.

Twenty-two percent said they had been principally motivated by financial return.

Asked why they might be uncertain about engaging in impact investing, 38% said they did not know enough about it. Twenty percent worried that doing so would generate lower returns.

Fifty-two percent of respondents said they believed strongly or somewhat that “impact investing means settling for lower returns.” Thirty-eight percent disagreed somewhat with this notion.

Tellingly, three-quarters of survey participants reported that they had not discussed impact investing in their foundation with their financial advisor.

Of those who had, 79% said they had brought up the topic with their advisors; only 21% said their advisors had initiated the discussion.

Sixty-four percent of respondents said they were not sure about which impact investments their advisor could provide. A similar percentage were unsure about the quality of these investment products.

“Given the potential of impact investments to further both financial and philanthropic objectives, it’s not surprising that private foundations are interested in them,” Page Snow, chief philanthropic officer of Foundation Source, said in a statement.

“However, our survey shows that foundations need and want more information before really diving in.”

Snow said financial advisors could take the opportunity to educate foundations and dispel myths that may be inhibiting them from achieving more impact with their investable assets.

— Check out How US Family Foundation Philanthropy Is Evolving  on ThinkAdvisor.


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