B. Scott Sadler, CFA -- President, Boardwalk Capital Management
Charitable organizations are in a unique position among investment entities; being able to enhance the public good though grants that are consistent with their charitable "mission". And while a foundation's mission is often narrowly defined (arts, health, environment, education, etc.), the purpose of every foundation is arguably the same:
| "A
charitable purpose... is for the public benefit." Charity Commission Website 2011) |
With this broader definition, how does a foundation's purpose factor in to its investment decisions? There are bigger issues at work here than many recognize.
Never have foundations had more choices when it comes to investments that provide societal benefit. Even choosing between two large cap companies in the same industry can have vastly different environmental and social impacts. So, where does an "investment" end and a "grant" begin?
Better yet, why must one even choose to define such a question at all, when both can further the organization's purpose and mission?
"Harmonizing a charity's giving and financial investing best serves the charity's public benefit purpose. Separating the two poses a false dichotomy. As investing and giving become more seamless, value is added."
Stephen Viederman, former president of the Jessie Smith
Noyes Foundation
|
The role of the financial advisor is to assist the foundation in identifying its objectives and helping shape its collective beliefs of what future challenges can be addressed through investment policy. They should help you determine how to make your grant making and investing consistent with your mission and purpose.
All investors are challenged to identify and reduce potential risks. Each organization will ultimately need to formulate strategies (perhaps with some help) around these tough questions that cross the lines between investments and purpose.
Such questions might include:
- "Which investments are at risk from the quantum changes that we are witnessing in resource scarcity, activist consumers, growing social media influence and the potential for emissions regulation?"
- "How can we ignore climate change and water scarcity while making grants to environmental causes?"
- "We support the arts, but are we doing so while other ignoring community development issues close to home?"
Foundations would be wise to begin exploring such questions. What is our fiduciary duty, and how does it intersect with purpose, mission and investments? Will our decisions today stand up to scutiny tomorrow?
There are no easy answers, but thoughtful exploration will at least show evidence that alernatives were considered along the way.
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