Aligning Endowment Investments with Philanthropic Mission

Context and Strategic Imperative

• Carrie Kennedy (President, RFK Human Rights) opened by framing the endowment assets of 243 U.S. foundations (each over $1B) where only 5% is typically deployed for mission-critical grants, leaving 95% ($950M per foundation) as "active" capital that currently may be advancing, undermining, or neutral to the mission.
• Kennedy highlighted two historical failures of misaligned investing:
  • The United Auto Workers (UAW) pension system invested in non-union competitor Kia while being unable to invest in struggling domestic automakers due to a strict "market rate of return" rule that severed the union's mission from its capital deployment.
  • The Sandy Hook teachers' union was invested in the manufacturer of the rifle used to kill their colleagues until the conflict was discovered, illustrating the fiduciary and reputational risk of "do no harm" failures.
• The panel defined "sustainable investing" as strategies seeking both financial return and social good, utilizing tools like negative screening, divestment, shareholder activism, and impact investing within capital markets.

Ford Foundation: Mission-Related Investments (MRIs)

• Darren Walker (Ford Foundation) announced a decision to deploy $1 billion over 10 years into mission-related investments (MRIs), a technical term for endowment investments with a double-bottom-line objective.
• The decision was enabled by a 2015 Treasury Department/IRS clarification confirming that considering mission is permissible within the "prudent man" safe harbor for fiduciaries.
• The $1 billion allocation targets affordable housing in the U.S. and financial inclusion for the poor internationally.
• Walker noted that while the affordable housing sector offers market-rate returns, future success is contingent on the federal government maintaining tax credits and subsidies against potential budget reductions.
• The Ford Foundation will conduct annual assessments of progress and explicitly links its $500–$600M in annual grants with its $12B endowment strategy.

Carnegie Corporation: "Do No Harm" vs. Impact Investing

• Kim Liu (Carnegie Corporation) stated the foundation currently has no plans to pursue direct impact investing, maintaining a stance of "doing no harm" rather than seeking double returns.
• The Carnegie Board remains skeptical of impact investing due to concerns that a "double bottom line" might compromise the long-term returns necessary for the foundation's perpetual existence.
• Carnegie invests through funds rather than directly, which limits their ability to execute the specific types of direct MRIs that Ford is undertaking.
• Liu expressed a strategic intent to leverage Ford's investments to learn from their model, potentially implementing a similar program in the future.
• The board views long-term investing as inherently aligned with mission if it avoids harm (e.g., investing in funds that do not support sweatshops or environmental destruction).

Robert Wood Johnson Foundation (RWJF): Screening and Portfolio Growth

• Brian O'Neill (RWJF) confirmed a $10.5B endowment strategy that screens out tobacco, handguns, and alcohol to align with the foundation's health mission.
• O'Neill argued against the notion that endowments are "dormant," citing that RWJF's original $1.2B grant grew to $10.5B, while $11B in grants have been distributed, making the endowment a critical tool for future mission.
• The foundation has successfully implemented screens by communicating clearly with investment managers, who generally cooperate rather than resist the constraints.
• O'Neill highlighted that the increase in endowment value is a direct result of long-term investment performance, reinforcing the link between prudent financial management and mission capacity.

Bill & Melinda Gates Foundation: PRI vs. MRI Bifurcation

• Mark Sussman (Gates Foundation) explained a structural separation between the foundation (operating arm) and the Bill & Melinda Gates Investment Trust (independent legal entity), which holds the endowment.
• The Trust employs a single screen (tobacco) but utilizes Program-Related Investments (PRIs) up to $1.5B for direct impact.
• Gates utilizes PRIs to structure deals like "volume guarantees" for family planning products, allowing them to negotiate global access agreements that mandate public availability of developed health products.
• PRIs allow Gates to attach specific riders to investments, such as requiring a portion of a biotech company's R&D to focus on diseases affecting the global poor (e.g., tuberculosis).
• Sussman noted that the Gates model favors PRIs over MRIs due to the legal bifurcation and the ability to structure debt or equity terms that directly advance the mission without compromising the trust's standalone fiduciary duty.

Margaret Cargill Philanthropies: Market Rates and Risk

• Sean Wishmeyer (Margaret Cargill Philanthropies) described a strategy of divesting from misaligned sectors (tobacco, upstream oil/gas) while proactively seeking mission-aligned private alternatives.
• Wishmeyer emphasized a "ruthless market rate" discipline, stating that investments not generating market returns belong in the grant-making portfolio, not the endowment.
• The foundation integrates mission considerations into every investment memorandum, assessing mission impact alongside rate of return for the entire portfolio rather than segregating a specific slice of assets.
• Wishmeyer cautioned that heavy concentration in mission-aligned sectors (e.g., renewable energy) can lead to portfolio saturation, limiting diversification.
• He noted that while they cannot be 100% mission-aligned across the entire portfolio due to market constraints, they actively seek opportunities where mission and return are copacetic.

Cultural Barriers and Systemic Biases

• Panelists identified conservatism and "stewardship" culture on boards as primary inhibitors to innovation, often prioritizing legacy risk avoidance over the experimental flexibility required to solve complex social problems.
• The panel criticized the "19th-century thinking" of boards that cling to donor legacies (including potentially racist or exclusionary views) to justify avoiding risk, arguing that mission requires evolving beyond historical constraints.
• It was noted that the U.S. philanthropic sector is lagging behind Northern Europe (e.g., Norway's Sovereign Wealth Fund) in adopting 100% sustainable investing mandates.
• Mark Sussman highlighted that the marketplace exhibits inherent biases, citing the high risk premiums required to invest in Africa despite the region's potential for high returns and the "perceived risk" preventing capital deployment.
• Sean Wishmeyer argued that diversity in investment decision-making is a critical solution to these biases, noting that asset management is 98% white male, limiting the "alpha" generated by diverse perspectives.

Actionable Initiatives for Pipeline and Diversity

• RWJF and Carnegie each donated $1 million to "Scholars for Educational Opportunity" (SEO) to fund infrastructure for a pipeline program that places diverse college students in entry-level financial roles.
• Brian O'Neill noted that while foundations often discuss diversity, they rarely fund the organizations that build the pipeline, creating a gap that requires direct capital commitment to fix.
• The panel agreed that returns improve with a diversity of opinion and that building a pipeline for diverse asset managers is essential for finding mission-aligned opportunities that are currently overlooked.
• Carrie Kennedy observed that the "wave" of change is moving, with increasing numbers of organizations and opportunities, though the pace remains slower than many activists desire.

Institutional Pressures: Endowments and Student Activism

• University endowments (e.g., Harvard, Yale, George Washington University) face increasing scrutiny from alumni and students demanding divestment from fossil fuels and other controversial sectors.
• Nelson (GWU Chair) described the dilemma of balancing responsiveness to student activists with the fiduciary duty to maintain a broad investable universe, noting that total divestment from sectors like energy is impossible without cutting off massive swaths of the market.
• Kim Liu suggested foundations have an advantage over universities as they lack living donors or student constituents, allowing for more independent decision-making if leadership is engaged.
• The panel cautioned foundations against remaining "insulated," warning that the real-world economy and public sentiment are shifting, and failure to engage with stakeholders will jeopardize the credibility and stability of philanthropic institutions.
• A student activist (Good Projects) highlighted the difficulty for young, non-legacy-led nonprofits to secure early-stage funding compared to those with family wealth, though panelists noted that "lived experience" and authenticity are increasingly viewed as valuable assets for funders.

Infrastructure and Emerging Vehicles

• The panelists confirmed that foundations are using grant capital to seed infrastructure for the impact investing ecosystem, including supporting B Corps, SASB, and the Global Impact Investing Network (GIIN).
• Mark Sussman noted that while interest exists in building health-oriented indices, there is a shortage of grant funding specifically for the "vehicles" needed to deploy capital effectively.
• Sean Wishmeyer and others expressed a desire to fund emerging managers and vehicles that align with philanthropic goals but face challenges due to the current scarcity of grant-making mechanisms for financial infrastructure.
• The consensus is that a broader ecosystem of infrastructure players is required to support the scaling of mission-aligned investments across all asset classes.