Investing for Foundations: Mission or Purpose

This article is excerpted from http://www.boardwalkcm.com.
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

Climate Action May Impact Dividend Growth

B. Scott Sadler, CFA -- President, Boardwalk Capital Management

Out-of-control firestorms in Colorado and 100-degree heat index in the nation's capital served as an apt backdrop for an important court ruling on climate risk... And an important marker for investors that their world is changing in ways they may not yet understand.

Earlier this week, the U.S. Court of Appeals for the District of Columbia found that the EPA's interpretation of the Clean Air Act to regulate carbon dioxide regulations is "unambiguously correct." The three-judge panel unanimously agreed with the Environmental Protection Agency's finding that carbon dioxide is a public danger.

According to David Doniger of the Natural Resources Defense Council, "These rulings clear the way for EPA to keep moving forward under the Clean Air Act to limit carbon pollution from motor vehicles, new power plants, and other big industrial sources."

Managing the Unmeasurable -- Where are My Risks?

B. Scott Sadler, CFA -- President, Boardwalk Capital Management

Investors for decades have equated risk with volatility. But as we learned in the economic crisis of 2008-09, unseen and external factors can wreak havoc on portfolios. 


So, what do we investors do with our newfound concern over risk? 


If the past is any guide, we dutifully build our concern over those past risks into our portfolio thoughts and allocations (knowing full well that the past seldom repeats itself in exactly the same way...)

THAT is a recipe for failure.

So, what risks are we missing?  What actions should we be taking now to protect from those risks?

There is a new school of thought called Integrated Risk analysis that refuses to ignore risks just because we can't quantify them.


Take ecological risk:  We know that society is consuming more of the earth's resources than it can replenish.  Our activities are even inhibiting the planet's ability to produce at the earlier rate and same cost.  And we are painfully learning that the available quantities of potable water and arable land are insufficient to support the growth forecasts that underpin our valuations.

Something in this equation is incorrect -- either valuations or growth -- and as fiduciaries, we have a responsibility to manage this risk.

Boardwalk Portfolios: Top Rankings for Ethics and Climate

Last month, global watchdog Ethisphere released its World's Most Ethical Companies list.  This month, research firm Maplecroft disclosed its Climate Innovation Index.  In both cases, Boardwalk's model portfolio holdings were well represented.

Among those considered most ethical, General Electric and Starbucks have made the grade for all six years of the study's existence. 

UPS, Cisco, Intel, Alcoa, and Pepsico were also among the domestic honorees in our models, while Accenture (Ireland), National Grid (UK) and Westpac Banking (Australia) were among the foreign holdings recognized.

The Carbon Innovation Index recognizes companies who "successfully innovate and manage climate-related opportunities and risks and are better equipped to operate in this future growth environment." Many of the same "ethical" companies are also making a serious effort to prepare for climate change.  Boardwalk holdings GE, Alcoa, Intel, Hess, Praxair and Ford are among the top ten ranked firms.

For more on the Boardwalk model portfolios click Global ESG Titans or ESG 50 USA.

My Sustainability Talk with Corporate America

Earlier this month, I had the pleasure of addressing the Atlanta chapter of the National Investor Relations Institute (NIRI) on the subject of sustainability. Investor relations reps are a company's connection to its shareholders -- answering investor questions, providing information, etc. It is hardly glamorous work, but requires a great deal of effort, and knowledge, to do it well.

Increasingly, questions come to them from investors like Boardwalk, asking about emissions, water usage, diversity, etc.  And many IR representatives are doing a yeoman's job of trying to meet the disparate needs of the investor community. At the end of the day, however, if your company is doing little to address the core issues that bother your shareholders, there ain't much that a pretty face or articulate voice are going to do to fix that.

The good news is that many companies are doing much more, and are using "sustainability" to improve nearly every aspect of their business.

Why the World's Largest Investors are Embracing Sustainable and Responsible Investing

Pension plans, college endowments and charitable organizations are some of the largest and most astute investors in the world. As individuals, should we take lessons from their actions?

In recent years, institutions who manage trillions of dollars have begun to take a new approach to investing. They have determined that resource scarcity, climate change, activist consumers and even the speed of social media have changed the investment landscape.

Company reputations are damaged in an instant, and billions of dollars can be wiped away by reckless actions. These institutional investors are increasingly employing a "Sustainable and Responsible Investment" model to help them manage this array of new risks, while positioning themselves to pursue additional opportunities...

Read more