What to Listen to this Week- latest “Returns on Investment” Podcast

The “Returns on Investment” podcast discusses the significance of The Ford Foundation’s impact investing announcement

This week, the podcast “Returns on Investment” held a round-table discussion on the Ford Foundation’s impact investing announcement made last month: $1 billion of its endowment will be used toward Mission Related Investments (MRIs) over the next ten year. The talk was hosted by Brian Walsh, head of Impact at Liquidnet, and featured Imogen Rose-Smith, a senior writer at Institutional Investor magazine, and David Bank, editor-in-chief at Impact Alpha.

With Brian as host, David was asked to set up the background of the importance of the Ford announcement. It’s a big step for Ford Foundation to invest endowment-side money for impact, and Ford could become a trendsetter in the philanthropy and impact investing space. One billion dollars is the largest impact investing mandate of a foundation to date. However, both Imogen and David countered with insight that the steps taken may not be enough.

Imogen Rose-Smith referenced a 2016 panel during which Darren Walker, Ford Foundation’s President, stressed the need to fundamentally shift the way the foundation’s practices and policies, including the endowment, work towards equality for all. Ford’s impact investing announcement could be viewed, as Imogen stated, as more of a carve-out of $1 billion for impact investing, rather than a true fundamental shift of merging the investment office and the program side of Ford Foundation. Imogen cited how the portion of the endowment dedicated to mission-related investment is not under the guidance of the chief investment officer, rather it is handled under the guidance of the chief of programming officer.

David viewed Darren Walker’s commitment to impact investing for part of the endowment as heroic, and a step in the right direction for dedicating endowment funds for good. But the announcement may have been late-coming, or, as Imogen warned, could possibly create a division between the investment office and the ‘impact investing’ program, due to the amount of separation.

What we really need to do… is engage in a much broader conversation of how to get not just philanthropic assets [dedicated to impact]; it’s still a tiny speck compared to the capital markets. That is the much bigger challenge.
David Banks

David hoped to see even more of the endowment dedicated to impact, and Imogen stressed the need for buy-in from the investment staff to create a broader culture of impact throughout the Ford Foundation office. The separation of the $1 billion from the rest of the endowment may have been a “missed opportunity” for Ford Foundation to more fully integrate impact in its approach to its assets.

“The question the Ford Foundation is answering is: we should better align our investing with our mission, and we are doing this by taking a billion dollars and investing it that way. … If that is important to you, this is a huge win. If your question is ‘what is a better and more sustainable approach to long-term investing and long-term asset ownership’ then to me they have failed in addressing that question.”
Imogen Rose-Smith

On a hopeful note, the round-table painted Ford’s announcement as a potential illustration of how endowment funds could be used toward mission, and success could push more dollars (and more foundations) toward impact.

As for the contextual monetary significance of the $1 billion commitment, Brian commented that $850 billion currently exists in the endowments of the U.S.’s 86,000 foundations, who give about $50–55 billion in grants annually. Ford Foundation’s commitment is a larger opportunity to influence the broader capital markets, above and beyond philanthropic grant money.

“It’s also about ‘how do we get different types of capital working in connection with other types of capital toward common goals?’ ”
Brian Walsh

Further insights were made about the inherent purpose of foundation endowments (should foundations be afraid of spending out?) and the ever-present question of the risk of concessionary returns in investing for impact.

We encourage listening to this short podcast (25 minutes!), and taking the time to hear the complex issues and attitudes that define the impact investing space.

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