How Did We Get Started?

Q: Why are we interested in sustainability, mission, and social investments?

A: For us, our values and ethics are integral to who we are and how we interface with the world. Therefore, constructing a “value/ethic firewall” between our personal and business lives is, for us, a false construct. SMSIs are a logical extension of our core beliefs.

Also, SMSIs allow small family foundations like ours to maximize our impact by augmenting the annual payout requirements with the effects of an investment strategy which is aligned with the mission of our foundation.

Q: How did we get started?

A: We understood early on that our advisors values and ours had to be aligned. We learned that when our values did not align, the task at hand could not realize its full potential. We started to articulate what we were passionate about and if our advisors could not deliver, we moved on. We also made the strategic decision to hire a team of advisors, rather than rely on any one consultant or firm to provide full services. This approach brought together the best possible team members from multiple disciplines (e.g., family coach, family office manager, tax advisor, philanthropic advisor, investment advisor, etc.) to form a cohesive team. It also provided a built-in ‘checks and balance’ and fostered high engagement in the process.

The path to our current investment strategy began with negative screens. We first attempted using negative screens to inform investments in our foundation, but realized early on that this was difficult to achieve and the impact was impossible to measure. Negative screening took a back seat to financial performance. Communication with our investment advisor at the time was at an all time low as we realized that his attitude and our needs were at odds. Therefore we decided to change investment advisors.

Q: How did our strategy evolve over time?

A: While we began the process of looking for a new investment advisor, we also dove down deep into seminars and workshops aimed at developing our nascent understanding of philanthropy. As participants in The Philanthropic Workshop West in 2003-2004, we listened to Jed Emerson’s thoughts on blended value investments. Participation in the Global Philanthropy Forum (www.philanthopyforum.org) further exposed us to international grant and investment opportunities.

In 2004, with our new investment advisor on board, and armed with a renewed passion for exploring ways to leverage our foundation, we turned the investment process on its head and made it our own. Our new advisor was as eager as we were, attending as many conferences as he could to tap into potential deal flow.

A key turning point in the process occurred when we merged our SMSIs with our asset allocation strategy and formalized the deal flow process. By integrating this into our investment process, there is no longer a “value/ethics firewall” between our foundation and its investments. By tracking this shift, we have seen that these investments can provide financial returns approximating the average risk adjusted returns of similar investments made without regard to sustainability, mission or social considerations.

So, in summary, having a team that is aligned with our values, integrating our SMSI strategy into our overall investment strategy and formalizing our deal flow process have all happily conspired to provide a sound basis for the thoughtful and purposeful growth of our SMSI commitment, thereby increasing our mission and program impact.